development

Randall Kempner: Building Prosperity Through Small Business Entrepreneurs: An Update

April 21, 2011

As many as 2.5 billion people in the world — 1 in 3 — do not have access to functioning sanitation systems. Not surprisingly, a host of maladies arise for families faced with this situation, ranging from malodorous living conditions to major diseases. Throughout the developing world, diarrheal disease is a top cause of death for children under five years old. In Kenya, one entrepreneur decided a market-based approach could help his fellow citizens. In the face of significant underinvestment in sanitation services by the public sector, David Kuria, decided to launch a business to confront this challenge. With support of a $757,000 loan from the Acumen Fund , he launched Ecotact in 2008. Today, the firm operates 40 pay-per-use toilet and shower facilities in Kenya that received 6 million visits in 2010 by users who pay less than 10 cents per visit. The firm has created 100 jobs and improved health results in 12 Kenyan communities. David is not alone. In developing countries, there are many other firms with good ideas that can both address a social challenge and earn profits. However, the vast majority of small business entrepreneurs lack access to resources they need to thrive. The Aspen Network of Development Entrepreneurs ( ANDE ) is a global network of organizations dedicated to supporting small and growing businesses (SGBs) in emerging markets. One of our core activities is to track the development of the SGB sector, especially of the various intermediaries that provide capital and other services to entrepreneurial firms. In late March, the Shell Foundation in London hosted ANDE’s second anniversary celebration at which we launched our new video and our 2010 Impact Report . The report showed solid growth for the SGB sector. Some highlights: – 31+ new funds launched in 2010 that include SGBs as target investments; 22 of these funds are primarily focused on SGB investments – The total target fundraise for these SGB-focused funds was $1.5 billion. – From 2001 through the first half of 2010, the total target raise for 199 SGB-focused funds was $10.6 billion. We know that ANDE members and the sector as a whole are reaching more small business entrepreneurs all around the developing world; but we also know we have barely scratched the surface of the need for both capacity development funds and investment capital. According to McKinsey and the International Finance Corporation (IFC), small and medium enterprises in emerging markets have an unmet demand for credit of between $750 and $850 billon. Over the past 10 years, the 63 funds managed by ANDE members have only invested about $900 million. Of course, local banks, non-ANDE funds, and especially development finance institutions (DFIs) have been major players in the space and have made billions of dollars in direct investments and capacity building projects. And DFI interest is on the upswing. Earlier this month, the Overseas Private Investment Corporation (OPIC) launched a new $250 million impact investing call for proposals. The G20, through their SME Finance Challenge, has raised $550 million in commitments from bilateral and multilateral donors to fund innovative approaches to unlocking additional private sector finance for these entrepreneurs. Good news to be sure. But many obstacles still remain before every successful small manufacturer in Lahore, solar-cell distributor in La Paz, or IT firm in Lagos has access to the resources they need to grow their companies and their workforce. Access to talent, access to markets and access to capital remain out of reach for most of these firms – even when they have already proven themselves successful. ANDE and its members are dedicated to helping these companies overcome these barriers. We want to be sure that every David Kuria finds the resources he needs to help his fellow citizens.

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Naveen Jain: Our Sputnik Moment: US Entrepreneurs Needed for the "Space Race"

April 20, 2011

Fifty years ago, Russian cosmonaut Yuri Gagarin became the first man in space. It was an event that spurred on America to catch up and exceed Russia’s achievement, as President John F. Kennedy outlined in 1962: “…this country of the United States was not built by those who waited and rested and wished to look behind them. This country was conquered by those who moved forward — and so will space.” Moving forward to 2011, it looks like we’re in a similar “catch-up” position. Russia is greatly expanding its space program and is considering investing $7 billion to build a base on the Moon as part of a plan to send a mission to Mars. China’s Lunar Exploration Program has announced its intention to mine the Moon for the substance Helium-3, and the Russian government has made similar statements about its wish to harvest it. While Kennedy exhorted Americans to throw their support behind the government’s efforts to reach the Moon, President Obama has made it clear that this job now belongs to private enterprise. In his 2011 State of the Union speech, he referred to this generation’s “Sputnik moment” — that is, the realization that a foreign superpower could usurp our economic leadership position. The president has indicated that the private sector should take over the job of Moon exploration, so now’s the time to use private enterprise know-how to tap into resources beyond those of the Earth. There have been some steps in the right direction. NASA has committed $30 million to buy information that is gleaned from future missions to the Moon; the money has been contracted to six teams who are also competing for the Google Lunar X PRIZE, managed by the X PRIZE Foundation . That’s a good beginning, but government and private enterprise need additional mechanisms to find funding, and make government expenditures for data worth the investment. As Obama has logically said, NASA’s mission should focus on exploring deep space, and private companies should take on the task of building ships to carry cargo and passengers to the International Space Station, and to the Moon. Rocket companies can get in on this market, as can mining companies. The time may be right to think about going to the Moon as a business rather than a hobby. That’s the goal of Moon Express , a new company of which I am a cofounder. We’re working on building vehicles that can deliver payloads to the Moon and search the lunar surface for precious materials. Why does this discussion of space exploration matter now, especially at a time when so many problems demand our attention here on this planet? Are we trying to go back to the Moon just because we can or is there a benefit to the world in lunar exploration? The answer is the latter. Moon exploration promises to yield new energy sources that could finally break our hold on fossil fuel, and our overdependence on sometimes hostile nations that control its supply. But this time around, we don’t need to rely on government funding to fuel Moon exploration — we can encourage private entrepreneurs to take on this role. The value in Moon exploration comes in part from the presence of valuable resources such as Helium-3, a source of energy that is rare on Earth but is abundant on the Moon. It can “generate vast amounts of electrical power without creating the troublesome radioactive byproducts produced in conventional nuclear reactors,” a Popular Mechanics article explains. In addition, platinum is present on the Moon, and could be mined for use in energy applications, where it is a key catalyst for fuel-cell vehicles. If China and Russia succeed in their goals to obtain Helium-3 and other rare resources for the development of energy, the U.S. could end up relying on these countries for its own energy needs. That’s a tricky thing from a political standpoint: What happens if our relations with these countries turn sour? What happens if Russia and China decide to severely restrict the sale of Helium-3 to other countries, which will drive prices sky-high? We’ll be in the same boat that we’re in now, where we are beholden to oil-rich countries that are often in turmoil. However, if we allow private enterprise to explore and take advantage of the Moon’s resources, we may set ourselves on the road to energy independence. To re-launch our space program, we need private enterprise to step into the void. Government funding only needs to take us to the point where the technology has been developed to get us to the Moon — and we already have that. It’s a model that’s been used successfully in the past: the military first developed the Internet, and private enterprise then seized on its commercial potential; the same thing occurred with GPS technology. Naturally, there are barriers to entrepreneurs leading the charge to the Moon. For one thing, ownership is always a point of discussion — but the fact is that “everyone” and “no one” owns the Moon. Much like when mining resources from international waters (as in fishing), entrepreneurs would need to respect the rights of other business and government players. There is legal precedent for explorers finding and keeping resources that they have uncovered via private investment. There’s also the question of whether we can transport resources from the Moon in a cost-effective manner. Perhaps the cost of rocket launches — by far the greatest expense for a Moon mission — will come down as more entrepreneurs move into this market, or new technology will make them cheaper. It’s even possible to create rocket fuel from resources on the Moon, which would slash return costs and even lower launch costs from Earth. On the other hand, mining and transporting these resources back to the Earth could depress prices as supplies grow, making such ventures less appealing to entrepreneurs. As with all private market endeavors, many will want to take a wait-and-see approach to the Moon’s market potential. But therein lies the opportunity for early movers who apply entrepreneurship to the opening of whole new markets, and in the case of the Moon, a whole new world.

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Angela Haines: Immigrant Entrepreneurs Challenge the Barriers

April 19, 2011

Maria Lores-Browne, a Colombian immigrant, began dreaming about her own business during her years working as a laborer on construction sites, doing everything from pouring concrete to laying flooring. She asked herself, “How can I do this when I’m 45 or 55 years old?” So she went to school to learn how to operate heavy machinery though she was repeatedly advised “they don’t take girls.” After taking the requisite courses, she qualified to join the Operating Engineers Union, but “they were always reluctant,” she says, “to send out woman to operate equipment so they only assigned me to jobs as a watchman for construction sites.” Maria persisted because “I love running big equipment; I love the feel of the paint, the fittings, the tires, the same way many women love diamond rings.” Last fall she started Berma Construction Company. The harsh New York winter provided her with her first customer. JFK Airport hired her company to plow snow. Like Maria, who now seeks funds to purchase equipment, the biggest problems most immigrants face is access to capital. What’s particularly hard for them, says Catalina Castano, Director of the Brooklyn Small Business Development Center is that “they are unfamiliar with credit rules. Many have no credit histories, though lenders insist on credit scores. And unlike native born entrepreneurs, they frequently can’t turn to their networks for a ‘friends and family’ first round; they often can’t find a co-signer on a micro loan.” Adds Elisa Balabram, who heads a government-funded Business Center in Brooklyn, “other countries have more informal rules for doing business, so immigrants have to learn about requirements; their language problems can add to their difficulties understanding financial rules and regulations.” The Vinci Tablet Dan’s new Galaxy tablet provides an interactive learning platform with an Android operating system; it features a sturdy red silicon handle, a non toxic tempered glass screen and has no wi fi components to minimize radiation; it will be available in July. These days Dan works mainly with psychologist, educators, and artists as she develops software for her tot tablet, combining her talents in advanced technology with the creative world, a step which presumably her early teachers would have considered a more appropriate arena for women! For more on women entrepreneurs, visit www.wstartup.com

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IMF Nations Discuss ‘Significant Risks’ Of Rising Global Food Prices

April 17, 2011

WASHINGTON (Lesley Wroughton and Isabel Versiani) – International Monetary Fund member countries sought to bridge sharp differences over the global economy, acknowledging that rising inflation in emerging markets poses a risk to rich countries too. Addressing one of their biggest challenges, the 187 IMF nations on Saturday recognized the alarm among developing countries about huge inflows of speculative cash that are stoking their growth but also their inflation rates. “When inflation goes up in emerging markets, it’s not just an emerging market problem, it’s a global inflation and possibly interest rate problem,” said Singapore Finance Minister Tharman Shanmugaratnam, who chairs the IMF’s steering committee. Top finance officials, in Washington for a twice-yearly meeting of the IMF, argued over the dangers posed by high government debt and super-low interest rates in sluggish, rich countries and the risk of overheating in developing economies. “It’s one of the most difficult policy moments, one of the most complex challenges I’ve ever seen, certainly in my lifetime,” Angel Gurria, head of the Organization for Economic Cooperation and Development, told Reuters. The increased focus on the pitfalls in the policies of wealthy nations is part of a shift at the IMF to be more attentive to increasingly influential emerging powers. Countries such as Brazil have struggled to cope with waves of yield-chasing “hot money” which pushes up inflation. World Bank President Robert Zoellick called rising food prices “the biggest threat to the world’s poor.” The World Bank estimates another 10 percent rise in the food price index could add 10 million more people to the 44 million already thrust into poverty over the last year. “We risk losing a generation,” Zoellick said. Aware of stiff opposition in some emerging countries to any limits on how they manage the inflows that drive up prices, IMF members said the policies that lead investors to chase higher returns in other emerging economies also need oversight. Tharman said inflation in the developing world, if unchecked, could spread to rich economies already shouldering large deficits. That would push up borrowing costs and threaten the recovery from the worst global recession in decades. “We have learned from painful experience in the last few years that nothing is isolated and that risk in one region…. rapidly gets transmitted to the rest of the world,” he said. The IMF committee said the global economy was strengthening but that policy action was needed given “significant risks.” It also sought proposals to strengthen IMF surveillance of “countries that pose the largest systemic risks.” The Group of 20 developed and emerging economies on Friday delayed a decision on contentious guidelines for when countries may use capital controls. French Finance Minister Christine Lagarde said “it seems vital to have a common set of rules.” France chairs the G20 this year and is seeking a deal on capital controls in time for a G20 leaders summit in November. The G20 did agree on Friday to a plan that could put more pressure on the United States to fix its deficits as well as push other leading economies, including China, to address their own shortcomings. Gurria said “sometime in the fall or this time next year, maybe inflation will have a higher profile” in G20 talks. IMF SHIFT ON CAPITAL CONTROLS The IMF this month endorsed use of capital controls, once considered anathema to its free-market philosophy. Advanced countries want to establish a framework to monitor their use, an approach emerging markets oppose. “Ironically, some of the countries that are responsible for the deepest crisis since the Great Depression and have yet to solve their own problems are eager to prescribe codes of conduct to the rest of the world,” Brazilian Finance Minister Guido Mantega said. Brazil, with one of world’s highest official interest rates at 11.75 percent, is among the countries that have used taxes and other measures to curb inflows. But rate hikes designed to cool growth end up attracting still more money from abroad. U.S. and other rich countries have long argued that emerging countries can combat inflows and price pressures by allowing their currencies to strengthen against the dollar. China, the world’s biggest exporter, has rebuffed acute U.S. pressure to let the yuan rise more rapidly, though Premier Wen Jiabao this week said the country should resort to more exchange rate flexibility to combat rapidly rising prices. Consumer price increases accelerated in both China and India in the year to March. GETTING FISCAL HOUSES IN ORDER Some finance officials said ultra-loose monetary policies and rising budget deficits in the United States and other advanced countries posed the main threat to global recovery. “The fiscal situation in the advanced economies gives us great concern, and it is in this area that we see the major risks to the global economy,” said Russian Finance Minister Alexei Kudrin. The IMF this week noted that the U.S. budget gap was on course to hit 10.8 percent of economic output this year, tying Ireland for the highest ratio of deficit to total output among advanced economies. It urged Washington to tighten its belt. At Saturday’s meeting, U.S. Treasury Secretary Timothy Geithner said the United States was “committed to fiscal reforms that will restrain spending and reduce deficits while not threatening the economic recovery.” Leaders also fretted about fiscally strapped euro zone countries and their ability to refinance their massive debts. (Reporting by Reuters IMF/G20 team; Writing by Steven C. Johnson; Editing by William Schomberg and Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Goldman Sachs Ripped Off And Misled Clients, Senate Report Says

April 15, 2011

Goldman Sachs, the nation’s fifth-largest bank by assets, systematically misled clients, sold them financial instruments it knew to be junk, bet against them and profited off of their losses, according to a Senate report released this week. The report, the product of a two-year investigation, paints the firm as Exhibit A of Wall Street’s evolution from a place that raises and deploys capital to worthy businesses into a vulturous creature that preys on unwitting investors. Goldman’s conduct in the two years leading up to the near-implosion of the financial system show a firm dedicated to “sticking it to their own clients,” said Senator Carl Levin, a Michigan Democrat who chairs the panel that produced the report. “Goldman gained at the expense of their clients, and used abusive practices to do it.” In 2006 and 2007, Goldman recorded more than $21 billion in profit thanks to a strategy that ensured earnings as the housing bubble inflated and then popped. It also dodged a loss in 2008 — one of the few firms to do so — during a year that saw the demise of three of its direct competitors. The “abusive” tactics the firm employed helped gain those winnings, according to the report by the Senate Permanent Subcommittee on Investigations. While Goldman was betting — or “shorting,” in Wall Street parlance — that securities would collapse, clients were on the losing end. “Of course we didn’t dodge the mortgage mess,” Goldman chairman and chief executive Lloyd C. Blankfein explained to a colleague in a Nov. 18, 2007 email documented in the report. “We lost money, then made more than we lost because of shorts.” Four complex financial instruments with names like Timberwolf and Abacus show how the firm profited while others lost, according to the Senate report. Goldman declined to comment for this article. Timberwolf was a $1 billion collateralized debt obligation squared, meaning it was a financial instrument comprised of other CDOs that were backed by various types of securities, like mortgage bonds and insurance contracts. Goldman issued the security, formally called Timberwolf I, in March 2007. It began to lose value almost immediately upon issuance. But Goldman was a step ahead of its clients. It immediately shorted about 36 percent of the assets underlying Timberwolf, meaning it would profit off their demise. Investors were kept in the dark about this development, according to the Senate report. In May 2007, Goldman promised one future buyer it could earn a 60 percent return on its investment in Timberwolf, even though Goldman’s interval valuations of the security showed the CDO was continuing to fall in value, the report notes. The prospective buyer, a hedge fund named Basis Capital, finally bought slices of Timberwolf on June 18 of that year, at prices of 84 cents and 76 cents on the dollar. Less than a month later, Goldman marked them down to 65 and 60 cents. Even Goldman salesmen had second thoughts about the firm’s practice of marking down securities within days or weeks of a client’s purchase. “Real bad feeling across European sales about some of the trades we did with clients,” one of the firm’s salesmen wrote in an October 2007 email to the head of Goldman’s mortgage unit, Daniel Sparks. “The damage this has done to our franchise is significant. Aggregate loss for our clients on just…5 trades alone is 1bln+ [more than $1 billion].” A few months earlier, a senior Goldman executive warned his colleagues about selling clients securities at one price and then immediately devaluing them. “[D]on’t think we can trade this with our clients [and] then mark them down dramatically the next day,” Harvey Schwartz wrote in a May 11 email. On July 13, Basis told Goldman that one of its funds was in “real trouble,” according to the Senate report. Three days later, Goldman marked down those securities to 55 and 45 cents on the dollar. Within weeks, Basis Capital liquidated its hedge fund. Goldman bought back the Timberwolf securities at prices of 30 and 25 cents on the dollar. Another Timberwolf buyer, Bank Hapoalim, purchased a $9 million slice at about 78 cents on the dollar. The Israeli-based bank didn’t know that Goldman’s internal valuations at the same time pegged the slice at just 55 cents on the dollar. Last week, another bank, Wells Fargo was fined $11 million by the Securities and Exchange Commission because the firm it took over, Wachovia, did something similar when it sold a client a slice of a security at 90-95 cents on the dollar even though Wachovia internally valued it at 52.7 cents on the dollar. In announcing the settlement, the SEC’s director of enforcement, Robert Khuzami, said the lender violated “basic investor protection rules — don’t charge secret excessive markups, and don’t use stale prices when telling buyers that assets are priced at fair market value.” In the end, though Goldman eventually lost some money on Timberwolf because it couldn’t sell all of it, its losses were offset by profits made from betting those securities would fall in value. Goldman profited “at the expense of its clients,” according to the report. Meanwhile, the buyers lost virtually everything. Basis Capital ended up declaring bankruptcy. Another CDO, called Hudson Mezzanine 2006-1, was a $2 billion financial instrument brought to market in December 2006. Goldman shorted all of Hudson, meaning it would profit if any of the slices lost value, according to the Senate report. Goldman “failed to disclose to potential investors that it was shorting the very securities [it] was selling to them,” the report notes. Instead, Goldman told investors that it had “aligned incentives” with them because it invested in a portion of Hudson. The report called that “misleading” because Goldman’s $6 million bet that Hudson would rise in value was “outweighed many times over by Goldman’s $2 billion short position.” Goldman also told investors that the assets underlying Hudson were “sourced from the Street,” as in other Wall Street firms. In reality, all of the assets were acquired from a unit inside Goldman. Two Goldman executives later told Senate investigators that the firm’s original description was accurate because Goldman was part of “the Street.” Goldman made a $1.35 billion profit off Hudson, earnings the Senate report described as coming “at the expense of [its] clients.” Similar practices occurred with two other Goldman CDOs, named Anderson Mezzanine 2007-1 and Abacus 2007-AC1. In Abacus, Goldman allegedly helped set up the mortgage-linked investment for a favored client, designing it to fail, yet sold it anyway to its other clients, reaping the favored client nearly $1 billion. Last year, the SEC charged Goldman with securities fraud. The firm later settled the accusations for $550 million. In Anderson, the Senate report claims Goldman bet that 40 percent of the assets underlying the deal would decline in value. Investors were never told. They also weren’t told that Goldman expressed reservations about the quality of the subprime mortgages that helped make up Anderson. Anderson investors were eventually wiped out and lost virtually their entire investments, according to the Senate investigation. “The evidence discloses troubling and sometimes abusive practices which show…that Goldman knowingly sold high risk, poor quality mortgage products to clients around the world,” according to the Senate report. It also alleges “multiple conflicts of interest” surrounding Goldman’s CDO activities. Previously, Goldman has defended its conduct and rejected accusations it did anything improper during the leadup to the financial meltdown. “Goldman Sachs did not engage in some type of massive ‘bet’ against our clients,” the firm said in a statement last year . “[We] never created mortgage-related products that were designed to fail.” The firm also has said that buyers of such securities were “large, sophisticated investors” that had “significant in-house research staff to analyze portfolios and structures and to suggest modifications.” The investors “did not rely upon the issuing banks in making their investment decisions,” Goldman said in a December 2009 statement . Also, the firm maintains that “it is fully disclosed and well known to investors” that Wall Street firms that arranged CDOs initially shorted the securities and that “these positions could either have been applied as hedges against other risk positions or covered via trades with other investors.” “Many major banks had similar businesses,” the firm noted. The report makes note of federal securities laws that Goldman may have violated. “Goldman…had an obligation to disclose material information that a reasonable investor would want to know,” the report notes. Levin said his investigators found a “financial snake pit rife with greed, conflicts of interest, and wrongdoing.” Last year’s financial reform law includes a section authored by Levin that tries to clean up the markets by prohibiting firms from betting against securities they sell to their clients. Levin pointed to Goldman’s activities as a primary reason for why he wanted that in the new law. As of 3 p.m. New York time, Goldman shares were down more than 3 percent since Levin’s report was publicly released. The Standard & Poor’s 500 Index is up about 0.6 percent.

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Agennix AG Appoints New Vice President of Clinical Development

April 15, 2011

Dr. Steven Simonson Hired to Lead Talactoferrin Sepsis Development Program

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Golden Living Names Larry Deans Chief Business Development Officer

April 11, 2011

FORT SMITH, AR–(Marketwire – April 11, 2011) – Golden Living today announced that Larry Deans has been named Chief Business Development Officer, effective April 15. Previously, Deans was President of Golden LivingCenters. Deans will have responsibility for developing new businesses and services to meet the needs of a changing healthcare environment. He also will be involved in evaluating potential merger and acquisition opportunities.

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Harwood Appointed as President of Parsons Enterprises

April 7, 2011

PASADENA, CA–(Marketwire – April 7, 2011) – Parsons announces the appointment of Dean Harwood as President of Parsons Enterprises, a new entity focused on the development of concession-based businesses built on Parsons’ strong credentials in infrastructure capital-asset delivery. Mr. Harwood will be responsible for corporate activities in public-private partnerships, project financing, project investments, and mergers and acquisitions (M&A). Mr. Harwood will report to the Office of the CEO.

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Parsons Appoints Squires as Senior Vice President and Strategic Planning and Regional Management Director

April 6, 2011

PASADENA, CA–(Marketwire – April 6, 2011) – Parsons is pleased to announce that Jeffrey F. Squires has been appointed as Senior Vice President and Strategic Planning and Regional Management Director. In his new assignment, Mr. Squires will be tasked with furthering the development of Parsons’ domestic regional development executive positions, assisting with enhancing the corporation’s business development processes, and coordinating the corporation’s 2015 Strategic Plan.

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ProMutual Group Appoints Donna Miele-Cesario to Chief Information Officer

April 6, 2011

BOSTON, MA–(Marketwire – April 6, 2011) – ProMutual Group, a leading provider of medical professional liability insurance, announces the appointment of Donna Miele-Cesario to Chief Information Officer. Promoted from within the company’s ranks, Miele-Cesario was previously the company’s vice president of Information Technology (IT). In her new capacity, Miele-Cesario will lead the development, acquisition and implementation of advanced technologies and systems for the entire ProMutual Group enterprise.

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In The Pipeline: Construction and Development News for April 3 – 9

April 5, 2011

In The Pipeline is a column on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project — and sign up to be added to our distribution list to receive future In the Pipeline columns by e-mail. Read previous columns and articles. Construction Begins on $700M CityCenterDC Development

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Major Obama Fundraiser Benefits From Millions In Federal Loans

March 31, 2011

By Ronnie Greene and Matthew Mosk The Center For Public Integrity In connecting green technology startups with government money, Silicon Valley venture capitalist Steve Westly boasts of a special touch. “We believe that with the Obama administration, and other governments … committing hundreds of billions of dollars to clean tech, there has never been a better time to launch clean tech companies,” says his company website. “The Westly Group is uniquely positioned to take advantage of this surge of interest and growth.” Uniquely positioned, indeed. One of President Barack Obama’s most prolific fundraisers, Westly was among guests at January’s state dinner for the president of China. A month later, he dined with Obama again at an exclusive San Francisco Bay area gathering for prominent high tech CEOs, including the leaders of Facebook, Google and Apple. He visits White House staff and, as a member of a government advisory board on energy policy, has the ear of Energy Secretary Steven Chu, whose department hands out the sort of seed money sought by companies in The Westly Group portfolio. He even has hosted the president at fundraisers in his Northern California home, and co-hosted events for three of Obama’s most influential advisors. All the while, Westly’s four-year-old green business has boomed. Since June 2009, four companies in his venture firm’s portfolio have received more than half a billion dollars in loans, grants or stimulus money from the Obama Energy Department, a review by the Center for Public Integrity and ABC News has found. Relatively few companies succeed in winning such benefits. More than 90 percent of applicants have failed to secure funding in two programs benefiting three Westly-backed firms. Securing government aid helps attract investors and can make corporate stars of even small startups. Funding for The Westly Group firms occurred prior to his joining the government advisory board, though an Obama administration proposal after Westly’s appointment immediately boosted the stock price of one company. Westly’s ability to straddle the worlds of big time fundraising, government advising and private financing for startup companies tells a larger story about how business and politicking intertwine at an Energy Department flush with $35 billion in stimulus money. “It looks like kind of the classic Washington hands washing each other,” said Mary Boyle, a spokeswoman with Common Cause in Washington. “He’s politically active, he gives money, he gets noticed, he lands on an energy board. … Firms that he backs are landing these lucrative energy contracts.” It’s the very cycle of money, influence and access that Obama vowed to break when he came to Washington but which persists two years into his presidency. Westly, a former public official in California, declined repeated requests from the Center for interviews and walked away without comment when questioned by an ABC reporter at a Washington event earlier this month. He isn’t the only politically active investor whose portfolio firms win energy grants. John Doerr, a California billionaire who made a fortune investing in Google, hosted Obama at February’s dinner for Westly and the other high tech executives at his secluded estate south of San Francisco. His venture firm, Kleiner Perkins Caufield & Byers, backs green tech firms, several of which secured DOE funding, records show. Doerr and Kleiner Perkins executives have contributed more than $1 million to federal political causes and campaigns over the last two decades, primarily supporting Democrats, and Doerr serves on Obama’s Economic Recovery Advisory Board. Doerr did not respond to multiple interview requests about his dinner with Obama. Another beneficiary of Energy Department aid is Solyndra Inc., a California solar power firm whose financial backers include Oklahoma oil billionaire George Kaiser, a bundler who raised at least $50,000 for the president’s campaign in 2008. Solyndra, a recipient of a $535 million 2009 loan guarantee to help create jobs, laid off some 180 temporary and fulltime workers the following year, prompting questions in Congress over whether its new manufacturing plant will spur the 1,000 fulltime U.S. jobs the company promised. Company spokesman David Miller said Solyndra, which first applied for the guarantee during the Bush administration, won it on merit. “Over time,” he said, “yes, we believe we will meet those goals.” Obama’s focus on environmentally promising technologies while gaining support from clean tech titans comes at a time when the Energy Department’s handling of government largesse is gaining scrutiny. The Government Accountability Office, the investigatory arm of Congress, raised concerns in a report last year about favoritism in the awarding of some loan guarantees. The Energy Department’s inspector general told Congress this month that some stimulus contracts may have been steered to “friends and family.” A GAO report to be released this week is expected to focus on a specific automotive loan program that benefited five companies, including two supported by the Westly and Doerr venture firms. There’s no indication in public records that any of those investigations focus on Westly, Doerr, Kaiser or their firms. “A lot of these contracts are really being pushed out the door with no oversight,” said Rep. Cliff Stearns, R-Fla., chairman of the Energy and Commerce oversight subcommittee. In an interview, Stearns pointed to the Solyndra contract as an example of poor government oversight. “I think what happens is, they give some of this money out to people who are either contributors or strong supporters.” A TRAIL OF LOANS, GRANTS AND TAX BREAKS The Obama administration’s efforts to reduce pollution, especially from coal-powered plants, and to lower dependence on foreign oil has unleashed an unprecedented wave of federal aid to clean energy startups. The federal dollars help clean tech firms expand their products and grow their bottom line. Four companies in The Westly Group portfolio received Energy Department loans, grants and stimulus money: Tesla Motors, RecycleBank, EdeniQ and Amyris Biotechnologies. Two of those firms, Tesla and Amyris, went public with stock offerings in 2010. The government largesse started with $465 million in loans that helped Tesla develop electric cars that cost $54,700 each. Four months later came a $700,000 federal grant, crucial to expanding a RecycleBank program in Philadelphia. In December 2009, the Energy Department awarded stimulus grants of $20.4 million for an EdeniQ bio-refinery and $25 million for Amyris to develop a diesel substitute through the fermentation of sweet sorghum, both projects in California. Over the last four years, Westly emerged as something of an entrepreneurial superstar in the clean technology movement. Then, in August, he gained a seat at the table when it comes to national energy priorities that affect his business interests. On the White House’s recommendation, Chu appointed him to his 12-member Advisory Board, a government-stamped seal of approval as The Westly Group pursues a $175 million round of fundraising to expand its portfolio. Westly cites that appointment on his company bio. Meeting minutes show he is leading a Chu subcommittee exploring “building energy efficiency.” In his venture capital firm, Westly is actively investing in energy efficient building materials, an area he describes as something of a new investment frontier. This February came perhaps the prized jewel for a Westly investment, when the Obama administration proposed to stimulate sales of electric cars by offering consumers a $7,500 federal rebate at the dealer. Stock in Tesla, the Silicon Valley electric car maker that went public last year, rose 6 percent with the news. Westly sat on Tesla’s board for more than two years, and though his firm recently sold its nearly 2.5 million shares, he personally remains a shareholder. “I think Tesla’s best days are ahead of it,” he told Bloomberg West TV March 11. Some executives of companies financially supported by Westly’s venture firm acknowledge that his activities — which include arranging introductions for them and helping them navigate bureaucracies in Washington even as he serves as an advisor to those bureaucracies — create the potential for a conflict of interest. But they say involving industry expertise is unavoidable, even necessary as the government strives to spur adoption of new technologies. “This is the sort of conflict the DOE and USDA and other agencies run into when they take a step — which I think is a good one — in trying to involve people from industry in helping to advise and set direction,” said Kinkead Reiling, co-founder of Amyris Biotechnologies, which landed a $25 million Energy Department stimulus grant in 2009. The White House and Energy Department deny that political supporters of the president have any edge as they compete for funding. “Grants and loans are competitively awarded on the basis of merit,” said Reid Cherlin, a White House spokesman. The Energy Department said it sees no conflict in his dual roles, saying Westly is an unpaid member of a board that is “advisory in nature.” A spokesman noted that the loans and grants came before his appointment. Because he is not a federal employee, Westly is not required to file disclosure or conflict of interest forms. The DOE said he made it aware of his investment activity and potential conflicts. Asked to release that information, the department said it was confidential. Over the course of two months, Westly — who has often sought attention for political candidates he supports, and for the green energy movement he is part of — declined to answer questions for this story or respond to multiple requests for an interview through his company and via email. “We’ve decided not to comment,” said Michael Kaufman, a Westly Group principal. When Westly came to Washington for Democratic fundraising events in March, he turned his back to ABC News and was escorted away by party officials. Those who have worked with Westly over the years say his greatest assets are as public cheerleader — and tour guide to help companies navigate political terrain. “He is a true believer in green technology at a time frankly when that was not very obvious,” said Marc Tarpenning, one of the founders of eight-year-old Tesla Motors. “Steve was always a supporter and a true believer in it. He’s not really a technologist.” Industry should embrace government, not fear it, Westly told Tesla. “‘Government is not always bad and especially for something that is going to affect your business, you should be involved with it,’” Tarpenning quoted Westly. “He encouraged us to think about Washington.” As a businessman, Westly is in the vanguard of a movement to transform the nation through clean technology, a key initiative of Obama, who is backing his pledge with billions of federal dollars. The push already has benefited a rash of innovative technology companies, including The Westly Group, one of the largest clean tech venture firms in the U.S. According to its website, the venture “has done very well” on a current $127 million investment fund, and is pushing ahead with a new round of financing targeted at $175 million. As a chief fundraiser for the president, he’s also at the vanguard of another development — the need to raise unparalleled sums of money for the 2012 re-election campaign. As a top fundraiser, Westly is in elite company: 52 so-called bundlers who raised more than $500,000 on Obama’s behalf in the 2008 race, according to records maintained by Public Citizen. By hosting fundraisers and making calls to wealthy associates and acquaintances, bundlers from Florida to California raise the millions that help candidates pay for increasingly expensive campaigns. Their work can prove pivotal in contentions races, and they often are rewarded with prestigious posts such as ambassadorships. Obama has continued a long tradition, tapping bundlers as ambassadors to Norway, France and Japan. More than 100 bundlers for the GOP’s George Bush landed government posts, from Cabinet slots to ambassadorships to New Zealand and Portugal. Westly’s success is striking for the string of victories by companies in his portfolio, and for his timing in tapping into a rare area of government growth: Alternative energy, infused with more than $8 billion for research and development in Obama’s budget. He has become the green bundler with the golden touch — and the president’s ear. Companies whose investors include The Westly Group and that have won federal subsidies say the benefits of an association with Westly owe more to his insights than any help on specific Energy Department grants. They say he has made introductions in Washington, where he once worked under Jimmy Carter, and that his background in energy and financial matters was fruitful. “We found that Steve is very helpful and insightful in understanding the political landscape, especially from the energy side,” said Reiling, who also serves as senior vice president of Amyris, which The Westly Group backed until it went public last year. “Because of his past in D.C., he has been able to get some introductions. Once he introduces us, it’s our job to actually do the work and show whoever he has introduced us to the value we can bring.” The Westly Group’s political connections distinguish the firm from many other venture outfits. “One of the things the firm pledges that differentiates The Westly Group from other venture capitalists is they help companies navigate the political landscape,” said Eric Wesoff, a senior analyst who specializes in renewable energy and financing for Greentech Media, which covers news and analysis about the green tech market. “If the premise is that The Westly Group is able to pull some strings to get their companies federal funding, that might actually be part of his business plan.” “Why is this man smiling?” asked the sub-headline on a Wesoff profile of the company. “Three of this investor’s portfolio firms listed on the Nasdaq in 2010.” Westly is quoted as saying he and his team are “experts in helping portfolio companies with their interactions with government — federal, state and local.” Entrenched energy and oil firms have long banked on political connections and policy know-how to secure federal money. Now startup clean tech ventures, following the same playbook, are simply trying to run with the giants. “They are fighting incumbents like oil, gas and coal, and they need every advantage they can possibly extract. And that’s why the DOE is giving out this money to provide some type of kick start to these non-incumbent technologies,” Wesoff said. “This is the way energy works. This is the way business works. And here are these enormous amounts of stimulus funds.” Added Wesoff: “This is the way power brokers broker power.” A POWER BROKER FROM THE START Westly, 54, stepped into politics early. He worked on Capitol Hill and in Carter’s Energy Department Office of Conservation and Solar before returning to California to become special assistant to the president of the California Public Utilities Commission. After earning an MBA from Stanford’s Graduate School of Business in 1983, he stepped into the business world, including a stint at Sprint Telecommunications. His most fortuitous career move: Becoming one of eBay’s early executives in 1997, where he helped the circle of young techies keep their eye on the bottom line in his role as Senior Vice President of Marketing, Business Development, M&A and International. “People were saying things like, ‘Well, you don’t really have to be profitable,’” he told The (San Francisco) Chronicle. His message: “You must be profitable.” The company was. And after Westly cashed out with riches in 2000, he quickly put his eye back on politics. With $5 million of his own money, he narrowly won election as California controller in 2002. Four years later, he sought the Democratic nomination for governor, infusing his campaign with $40 million from his personal fortune — and lost. Westly returned to his business roots and continued to wield influence from the heart of Democratic Party fundraising. By early 2007, he founded The Westly Group, a Menlo Park venture created to tap into the mushrooming clean tech movement by linking companies with green ideas to big money to back their projects. The firm soon hit significant pay dirt, completing a vision its founder set from the start. “We believe that clean-energy innovation can achieve the dual aims of protecting our environment and generating economic opportunity,” Westly wrote in a piece he co-authored in November 2007 for the Progressive Policy Institute, a think tank affiliated with the Democratic Leadership Council. In March 2007, just as The Westly Group was getting off the ground, he joined the board of directors of Tesla, the California electric-car start-up then poised to introduce its first model — a sporty two-seat Roadster with a base price of $109,000. That same month, March 2007, Westly gave $2,300 to Obama, part of a series of federal contributions to political causes. Westly co-chaired California’s Obama for President Campaign, a fact also noted on his company website, and has personally contributed more than $360,000 to Democratic campaigns and causes since 1998, according to federal election records compiled by the Center for Responsive Politics. “I’m here to tell you Obama is the candidate with the momentum. Obama is the candidate of vision, and Obama is the candidate who is going to inspire a new generation of Democratic voters,” Westly, speaking before a “Change We Can Believe In” banner, implored a crowd as Obama battled Hillary Clinton for the Democratic nomination in the 2008 election. “Are you ready to fire it up?” he asked. After Obama’s election, Westly was rumored to be on the short list to become the president’s energy secretary, according to media reports. The slot went instead to Chu. Westly firms quickly tapped into the giant pot of federal money earmarked to the clean tech industry. In winning the 2009 energy department loan, Tesla landed in rare company — just 5 of 130 applicants for the loan pool have received funding, records obtained by The Center show. The department said not all applicants were eligible or a good fit. The GAO has chided the Energy Department for its handling of other loan programs geared toward new technologies and reducing emissions, finding last year that the department “had treated applicants inconsistently in the application review process, favoring some applicants and disadvantaging others.” It said the department fast-tracked approvals for some applicants, and sometimes committed money before all its reviews were finished, “allowing these applicants to receive conditional commitments before incurring expenses that other applicants were required to pay.” Separately, the Energy Department’s inspector general, Gregory Friedman, said his office has 64 open investigations centered on stimulus spending. They include “the directing of contracts and grants to friends and family,” Friedman told the House Subcommittee on Oversight and Investigations. The department has one of the biggest pots of recovery money anywhere in the government – $35 billion. With just one third of that money spent so far, “we expect that our efforts in this area will continue for some time,” Friedman said. Now, a new, pending GAO report is focusing on the Advanced Technology Vehicles Manufacturing (ATVM) loan program that aided Tesla and four other car firms. Documents obtained by the Center for Public Integrity under a Freedom of Information Act request show that one of the firms turned down for funding in that loan pool complained of unfair treatment and being ignored. In a five-page letter to Chu, dated Sept. 21, 2009, the company said it had been given no reason for its rejection and had to call the Energy Department multiple times simply to learn what happened. “DOE reviewers never even talked to the founder, inventor, engineers, project leads or primary contractors to obtain additional information,” said the letter from the California electric car maker, XP Vehicles, Inc. “Why was staff at DOE during the course of the year positive about the outcome and never asked for additional information?” Other firms shut out from the car program have expressed similar frustration, James Taylor, CEO of Ohio’s Amp Electric Vehicles, said in a Q & A last week on Edmunds.com. “These are companies trying to get off the ground and are just like us, starving for cash, looking for investors,” Taylor said. The government money is “not falling through the funnel and getting out to us.” For upstart firms, such loans make a huge difference. Tesla’s came in two parts. The biggest chunk — $365 million — was earmarked to bankroll a manufacturing facility for the $57,400 Model S sedan, which is expected to hit the road in 2012. “The all-electric sedan consumes no gasoline and runs entirely on electricity from any conventional 120V or 220V outlet,” the department said. The other loan “will support a facility to manufacture battery packs and electric drive trains to be used in Teslas and in vehicles built by other automakers, including the Smart For Two city car by Daimler.” “We don’t simply make code that we put out on the Web. You have to buy big pieces of mechanical infrastructure,” Diarmuid O’Connell, Tesla’s Vice President of Business Development, said in an interview. He said the financing, coming at a time commercial bank investments were drying up, was crucial to helping develop the Model S. Consumers will benefit, O’Connell said, as the lower cost Model S is nearly half the price of the Roadster. Versions with longer battery lives will cost $10,000 to $20,000 more, Tesla recently announced. “It’s not at all about the Tesla Roadster or toys for rich boys,” he said. As for Tesla securing funding sought by many but won by few: “Frankly, as a taxpayer I feel pretty good there’s been a high degree of analysis” in the award process. O’Connell said Westly aided the company on big picture issues — “he was a helpful sounding board” — but not the application itself. He said Tesla first explored government funding under Bush, though it secured its loans from Obama. Westly’s biggest role, he said, has been as tireless public cheerleader for Tesla, citing the multiple green energy forums in which Westly has appeared. “He’s a huge advocate of the company.” Now, with his latest blueprint for federal spending, Obama wants to hand consumers a $7,500 rebate when they buy an electric car, helping push his long-shot goal of 1 million electric vehicles on the road by 2015. Tesla, with the Roadster already on the road and the Model S coming next year, could be among electric car makers to reap a windfall from that subsidy. If the rebate goes through, the Obama administration will have aided Tesla at the front and back ends of its production line: The June 2009 loan package, given while Westly served on Tesla’s board of directors, helped the company build a manufacturing hub for the Model S. Now, the administration’s Cash for Clunkers-like rebate — eyed for cutting-edge electric vehicles — could help Tesla sell those cars to buyers wary of the sticker price. Until now, consumers buying hybrid and electric vehicles could pocket a tax credit of up to $7,500, but would have to wait until they filed their tax returns to benefit. Now, the break would come at purchase. The rebate could make a “huge difference” for consumers and electric car makers, said Will Beckett, membership chair of the Electric Auto Association. He said not everyone qualifies for the current tax credit. So, handing a rebate at the dealer could draw in many more buyers — adding to other subsidies already available. In his home state of California, for instance, the state already gives a $5,000 rebate to buyers of electric cars. Tesla’s O’Connell agrees the front-end rebate could lure more consumers. “Any economist will tell you that that’s the best place to stimulate the buyer’s decision,” he said. “It’s helpful on the margins. Will it be decisive? The market will prove that out.” In February, Tesla opened a showroom for its Roadster on K Street, Washington’s lobbying corridor. The Roadster accelerates from 0 to 60 mph in 3.7 seconds without gas and travels 245 miles on a charge. Tesla said 1,500 of the cars are on the road in 30 countries. “We’re excited to bring this spirit of innovation to the nation’s capital,” the company said. While The Westly Group website said the company is no longer a shareholder in Tesla, Westly continues to be, and his venture firm’s relationship ended recently. When Tesla went public in June 2010, Westly Capital Partners Fund sold more than 70,000 shares valued at $1.2 million, a minuscule portion of its nearly 2.5 million shares, according to SEC filings and the VentureBeat publication. The company, which once held more than 3 percent of Tesla, wasn’t fully divested until late last year. Westly sat on Tesla’s board from March 2007-December 2009. ENERGY GRANTS FLOW TO VENTURE-BACKED FIRMS The other energy department grants to Westly-backed firms ranged from several hundred thousand dollars for recycling programs to more than $20 million for green-tech work in California. A $700,000 Energy Efficiency and Conservation Block Grant, filtered to Philadelphia in 2009, helped RecycleBank expand its recycling benefits program in the city. “We can stand on our own two feet. The Westly Group, they’ve helped us in a billion ways, but never in a municipal contract,” said Matt Tucker, RecycleBank’s president. “He’s very focused on financials for us.” In December 2009, Westly-backed EdeniQ landed a $20.4 million Energy Department grant in partnership with Logos Technologies to “modify and operate a pilot-scale bio-refinery plant to produce low-cost ethanol bio-fuel from cellulosic feedstock,” the companies said. “It keeps a good company alive. It gives us more of a runway to develop new technologies,” said Will Gardenswartz, an EdeniQ contractor on the grant, who said the link with long-established Logos was important. That same month, Amyris Biotechnologies landed $25 million in stimulus money that will help the company convert simple sugars into fuel. “On this particular grant there wasn’t a need to bring in the big guns, but he has been very helpful generally,” Reiling said. “He has a good insight into where the political momentum is going and he has made certain introductions to us. … The best idea should win, but he’s been helpful in getting us to the forum.” Logos/EdeniQ and Amyris were two of 19 projects funded under an Energy Department program that attracted over 300 applications. The department said the projects were reviewed by independent experts and that nearly half of the applicants failed to meet eligibility criteria. At least two other companies that later joined The Westly Group portfolio, Amonix and CalStar Products, secured Energy Department funding just before their financial pact with the venture capitalist. Amonix, which makes solar panels, won $9.5 million in stimulus funding in January 2010 for manufacturing work in Nevada and Arizona. Three months later, Amonix announced a $129.4 million round of financing that included The Westly Group. In July, with Amonix in the Westly fold, President Obama spoke alongside Amonix executives during a speech at the University of Nevada at Las Vegas, using the setting to press Congress to pass a $5 billion extension to the administration’s clean energy manufacturing tax credit. The White House said it did not make any trips at Westly’s suggestion. Amonix executives did not respond to interview requests. Doug Koplow, founder of the energy consulting firm Earth Track, which tracks government energy subsidies, said investments to venture capital projects raise important questions. “Is the venture capital firm itself still having a lot of risk and money on the table?” Koplow asked. “When you get easy federal money, it actually can crowd out and worsen the discipline and due diligence.” READY ACCESS TO THE WHITE HOUSE, OBAMA, CHU From California, Westly frequently finds his way to the nation’s capital. In October 2009, he spent two days visiting The White House, records show , the first a meeting with Nancy Hogan, Director of the Office of Presidential Personnel. Hogan’s office referred calls to the White House, which said Westly met her “to discuss potential opportunities for service within the Administration related to green energy policy.” The next day, Oct. 27, Westly spent 30 minutes with Chief Technology Officer Aneesh Chopra, whose duties include job creation. Chopra said he had met Westly in California, and that the venture capitalist came mostly to hear about Chopra’s new role in government. “He shared with me in that meeting he’s very passionate about clean energy and clean technologies,” Chopra said. “He mostly listened. He wanted to hear what I was doing.” Chopra said they didn’t discuss grants or loans. “The White House does not intervene at all on any particular grant programs, procurement activities. We are policy advisors,” said Chopra. White House records also list Westly among the president’s guests at the June 2, 2010 Gershwin Award ceremony honoring Paul McCartney. The concert, in the East Room of the White House, included tributes from Stevie Wonder and Emmylou Harris. In August 2010, Westly was appointed to the Secretary of Energy Advisory Board, along with academics and current or former executives from Lockheed Martin, IBM, DuPont and United Technologies Corp. “They will be providing their expertise and experience at a critical time for our country as we chart a new course toward a clean energy future,” Chu said in a statement. The White House said it “identified the board as a potential fit for Westly, communicated that to DOE staff, and referred Westly to the Department,” wrote spokesman Cherlin. In the board’s introductory meeting in September, Westly was in attendance as the discussion included a DOE presentation on how the Recovery Act “has positioned the Department of Energy to take a different role in Clean Energy Deployment” — and how the department needs to leverage grants, tax incentives and loans, the meeting minutes show. Then Jan. 20, Westly led a subcommittee exploring ways to incentivize building energy efficiency. “Member Westly will compile a menu of options for overall building efficiency and bring it back to the group for discussion,” the minutes say. In his interview with Bloomberg West TV, Westly was asked where his company was putting its money. “But one of the areas that is perhaps least talked about that we like most, is energy efficient building materials, green building materials,” he said. “You are going to see a revolution in clean building materials.” He is backing that talk with investments. In February, The Westly Group took part in a $10 million round of financing for Soladigm, a developer of energy-efficient glass for buildings. A Westly Group managing partner joined Soladigm’s board of directors. As a member of Chu’s Advisory Board, Westly is allowed to discuss policy issues that could impact venture capitalists like himself. Energy department policy states only that he is not to take part in matters that would directly affect The Westly Group. The department said it sought Westly’s expertise as a venture capitalist. Asked about his investment in green building materials even as he leads Chu’s committee on the topic, the department said Westly’s investments were factored in when deciding his role. “The Secretary of Energy Advisory Board is meant to provide advice to the Secretary on energy policy and on the overall direction of the Department of Energy,” spokeswoman Stephanie Mueller wrote in January. Chu did not respond to an interview request in January, and on March 10 said he had no time to talk. “The Secretary’s schedule is unfortunately packed for the next several weeks so he won’t have time for this,” the department wrote. The Center filed a Freedom of Information Act request for correspondence between Westly and the Department of Energy. While the department released some records last week, it cited privacy concerns as reasons for withholding three pages of Westly’s personal financial information, as well as much of the contents of emails detailing discussions between Westly and the Energy Department’s legal counsel. The records do show that the Obama administration asked Westly to co-host events in March 2010 for Chu and senior advisor Valerie Jarrett, each of whom had spoken that month at Stanford University, and for Jim Messina, Obama’s 2012 campaign manager — and that Westly wasn’t shy about mentioning his connections. “Please forgive the delay on this, but the Administration has asked me to co-host events for Valerie Jarrett (last Thursday) and Jim Messina and Secretary Chu (both of which are tomorrow) so things have been a bit busy on this end,” Westly wrote to Sue Wadel, the Energy Department lawyer conducting his conflict of interest review for the board. “The good news is that we will have good turn-outs for all events!” said Westly’s March 2010 email. In October, two months after his appointment to the energy board, Westly helped Obama once more, as Democrats nationwide struggled to win seats amid the battered economy. At a guesthouse on his Atherton property, 30 miles south of San Francisco, Westly raised money for San Francisco District Attorney Kamala Harris’ successful bid to become state attorney general. Then, at his main home that October evening, Westly sought funds for the Democratic National Committee. “It’s an extraordinary honor to host the president at your home,” Westly told local reporters. “And I’ve never seen the president more pumped up.” Westly and his wife rubbed shoulders with the President and Mrs. Obama at the Jan. 19 state dinner featuring a menu of poached Maine lobster, dry-aged rib eye and “An Evening of Jazz.” Then, Westly connected with Obama again Feb. 17 as the president dined in Northern California with high-tech wunderkinds at fellow venture capitalist Doerr’s estate. The meeting, a White House official said, was “part of our ongoing dialogue with the business community on how we can work together to win the future, strengthen our economy, support entrepreneurship, and get the American people back to work.” The president and high tech executives broke bread over “our shared goal of promoting American innovation,” the White House said, along with Obama’s “commitment to new investments in research and development, education and clean energy.” Westly sees only good things ahead. “For our firm, we had three companies go public last year alone. It was a banner year,” he told Bloomberg West TV. “And I think this year is going to be better.”

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Larry MacDonald: M&A: Increasing Your Company’s Sales Price With New Products

March 31, 2011

The value of a company being acquired is, in part, calculated by estimating the future value of its income stream. Having valuable new products in your development pipeline demonstrates greater future value. In anticipation of selling a company, it may be advantageous to identify new market needs and have a number of attractive opportunities in the development pipeline to sweeten the deal. Products in your pipeline will only be deemed to have significant future value if the potential acquirer believes they address a real need and there is existing demand, all other things being equal. Using proprietary technology combining sophisticated web-based crowdsourcing and market gap analysis, it is now possible to reduce the time and cost to bring product concepts to a level where buyers can estimate the future value of their contribution to earnings. This enables you to sell at a higher price. New needs analysis methods detect latent market needs before they become consciously apparent to even those with the needs. By focusing on the most appropriate needs, valuable intellectual property can be created quickly and inexpensively. Most companies make little use of the intelligence available to them from their stakeholders, and even less from non-customers. These stakeholders and potential customers can be valuable resources in the identification of market needs. It is not as simple as asking them, though. If you ask someone what they would like you to invent, they will give you a blank stare. Most people are unable to see what is not there. Why would acquiring companies prefer to buy new products in development in smaller companies? Usually, breakthroughs come from outside an industry because those in the industry are so attached to the existing way of doing things. Perhaps subconsciously employees resist suggesting change because it might affect the jobs of their peers or expose them to ridicule and hurt their reputation. More likely it is because the company has never had a process in place to deal with employee contributions. Large companies should not be expected to push innovation. They are the companies that we expect to be dependable and strong, like the trunk of a tree. Their inflexibility is strength, not weakness. The development of “new buds” takes place on the periphery, at the end of the branches, in smaller, more limber companies. Large companies prefer to buy companies that have taken the risk and created something new with big markets and existing demand. They want the risks reduced to a minimum and will pay well for it. If you select valid solutions to latent market gaps and can show those solutions address an existing demand, the potential buyer may well have good reason to believe that your company is worth more than if it didn’t have those new products in the pipeline. The cost of identifying possible new products with the characteristics of large market and existing demand need not be high. It can be accomplished in the range of $250,000 assuming several are done at the same time. By gathering potential market needs from those who are not yet your customers, but you would like to become customers, you can often find opportunities unavailable to you through your normal stakeholders. Focusing on needs for which a solution would generate at least $200 million would be the first filter. The next filter would be to eliminate any on the list that don’t exhibit existing demand, even if the particular product specifications are not articulable by the market. Once the need is quantified and meets the qualifications, the next step is defining the ideal characteristics of the product and what acceptable design might comprise. Then it is relatively straightforward to design the product and take it to the stage where the initial protection of patent pending status can be gained. From there, the marketing department can create marketing presentation materials that communicate the value proposition, show potential packaging, and describe the product features and benefits. With these materials in hand, providing they are supported by quantifiable market estimates and demonstration of marketing demand, a case can be made for increased valuation based on estimated future earnings from the product. If you had five products in the pipeline with potential revenue of $1 billion over the next 10 years, what would that do to your company value? Depending on the size of the market and number of products in development, the value of the company can be significantly increased at a relatively low cost in anticipation of sale of the company. From start to finish can be as short as four months, assuming you are not developing new technology. Disclaimer: The process described above was developed and tested over the last four years by Edison Innovations, Inc. as a method of generating new intellectual property for license to companies and entrepreneurs seeking new concepts to build a company around.

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Gilbert B. Kaplan: Apply the Obama Doctrine to the Trade Problems With China

March 29, 2011

We have one trade problem in this country that so far surpasses every other one that it is almost not worth talking about any of the others. The problem is Chinese subsidy practices, and our resulting $260 billion sustained trade deficit with China. The problem has recently taken on a new, more dangerous bent. First, China has made it increasingly clear they are not going to do anything about their undervalued currency . One aspect of the currency problem has been much talked about — how it makes Chinese exports to the United States very cheap and our exports to China uncompetitive. But it is now clear that the Chinese undervaluation has an even more nefarious and dangerous and long-term effect. It is a big driver forcing U.S. companies to leave the United States and relocate to China . This is because of the simple reason that a relatively “overvalued” dollar goes much further in China building plants and buying inputs and paying workers, than it does in the United States. This is not just a question of very low wages in China, it is about the additional accelerant of low cost renminbi making already low wages and cheap inputs even cheaper. So U. S. companies cannot afford to stay in the U. S. And once they leave it is very unlikely they will ever come back. The other development is a Chinese government pronouncement late last year that they are pumping subsidies of $1.5 trillion into seven strategic industries . The money will be going to the same emerging industries that President Obama and substantially every governor in the United States touts as the “industries of the future” that will rescue the United States from its high unemployment and anemic growth. The industries include information technology, environmental protection, new forms of energy (read wind and solar), biology, and new materials. On average that’s $214 billion per industry, and this leaves even the best U.S. companies with a choice. They can stay in the United States and scrap for the few million dollars the local communities and states and Federal government might provide. Or they can pull up stakes, go to China, and get their share of the $1.5 trillion being passed out over there. The Chinese, by the way, have no problem giving their money to U.S. companies, if the U.S. companies will put their plants up in China and turn over their technology. Unfortunately, even for the most patriotic CEO’s and Boards of Directors, this is an offer that is almost impossible to refuse. President Obama has not done nearly enough about this. There is no unfair trade strike force to fight back against Chinese subsidies. There’s no application of the countervailing duty (anti-subsidy) law to Chinese currency undervaluation. There’s no new trade legislation being proposed to modernize our laws, despite the fact that our last major trade law reforms occurred in 1994, 17 years ago. Why is this? I suspect that one reason is that President Obama does not want the United States alone to bear the brunt, economically or in terms of foreign policy, of standing up to China. All the Treasury bonds held by China, all the U. S. companies already substantially invested there, the Chinese spot on the U. N. Security Council, all militate against this much needed aggressive posture on trade. But I urge the president to take a lesson from himself, and apply the reasoning of Monday night’s speech on Libya to the international trade arena . The President should work on building an international consensus to deal with Chinese subsidies. He should direct his trade officials to meet intensively with other countries to kick-off this initiative. I think he would find allies for this effort in the European Union, and in Mexico, Turkey, Argentina, Canada, Brazil, and Japan, among other countries. I have talked to trade negotiators and industries in all these countries and they share our concerns. None of them want to see their industries moving to China, particularly the emerging industries of the future. Conveniently, Secretary of the Treasury Tim Geithner is going to Nanjing, China this week to meet with the G-20 leadership to discuss global economic issues. He should take the opportunity to meet off-line with like minded G-20 leaders and should focus on two issues. First, he should suggest that these countries join with the United States to begin an anti-subsidy case at the WTO (World Trade Organization) regarding the Chinese undervalued currency. In my view this international case is not the ideal approach; it would be better to proceed alone under our own laws. But it may be one the Administration is more comfortable with, consistent with the new Obama Doctrine of coalition building. Secondly Mr. Geithner should call on key members of the G-20 to begin a strategic dialogue with China, on their subsidy practices for emerging industries, which would demand a change in direction. Subsidies are as unfair and distortive as tariffs, a trade barrier the U.S. led the world in fighting back years ago when it started the GATT and the WTO. It is now time for us to exercise the same leadership on this most significant unfair trade practice of today.

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Visual IQ Appoints Analytics Expert to Enhance Scientific Modeling for Cross Channel Marketing Attribution Solutions

March 28, 2011

Dr. Payman Sadegh Joins Company as Director of Research & Development, Marketing Analytics

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Video: OECD’s Gurria Sees `No Time For Bickering’ in Portugal

March 25, 2011

March 25 (Bloomberg) — Angel Gurria, secretary general of the Organization for Economic Cooperation and Development, talks about the outlook for the sovereign debt crisis in Europe and the need for political stability in Portugal. He speaks from Washington with Andrea Catherwood on Bloomberg Television’s “Last Word.”

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Bausch + Lomb Appoints David Mordaunt, Ph.D. as Vice President, Development and Research, Surgical

March 24, 2011

ROCHESTER, NY–(Marketwire – March 24, 2011) – Bausch + Lomb, the global eye health company, announces the appointment of David Mordaunt, Ph.D. as vice president, Development and Research, Bausch + Lomb Surgical.

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Senate Dems: GOP Cuts Would Cause Surge In Gas Prices

March 22, 2011

WASHINGTON — With gas prices soaring, 45 Senate Democrats signed a letter on Tuesday urging GOP leaders to abandon their proposed cuts to the budget for a key regulator that oversees the food and energy markets, part of a broader effort to reduce government spending. The letter, sent to Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker John Boehner (R-Ohio) on Tuesday, argued that Republicans should protect funding for the Commodity Futures Trading Commission, which would be cut by one-third under a defeated House GOP plan. “The CFTC serves as an important ‘cop on the beat,’ working to protect American consumers by cracking down on manipulation and other market abuses that can drive up oil prices,” the letter reads. “At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities.” For their part, Republican leaders say the responsibility for rising gas prices rests with the Obama administration, which put a freeze on some offshore wells last year following the disastrous oil spill in the Gulf of Mexico. Boehner spokesman Michael Steel dismissed the letter from Senate Democrats as an attempt to divert the blame for the price of oil. “This is just another attempt to distract from Washington Democrats’ irresponsible opposition to increased American energy production, which would lower gas prices, reduce our dependence on foreign energy, and create American jobs,” Steel told HuffPost. “American families know talk is cheap but gas is not — and the Democrats who run Washington have no plan to help.” House and Senate leaders have struggled to reach an agreement on government funding for the remainder of the fiscal year, partly because of riders lumped in with the funding bill that would block money for Planned Parenthood, last year’s health care law, the Environmental Protection Agency and consumer financial protection. The two chambers must compromise before a current stopgap measure expires on April 8. The House Republican bill, which the Senate voted down on March 9 , would require the CFTC to lay off about a third of its staff. Some economists and consumer advocates are concerned that aggressive Wall Street speculation in energy markets is helping to drive up the price of food and gas around the world. “So long as you have money available to banks at zero cost, no long-term productive outlets for investment, and the capacity to make money by manipulating commodity pools, the situation is ripe for speculative excess,” University of Texas economist James Galbraith told HuffPost last month. Oil prices have been soaring in recent months , eclipsing $100 a barrel, which has sent the price of gas to over $3.50 a gallon and nearly $4 in California. A report prepared for the April meeting of the Group of 20 leading world economies by the Organization of Economic Cooperation and Development attributes rising prices primarily to increases in real demand, rather than financial speculation. Yet the increase in prices has also tracked speculation’s rise, prompting the U.N.’s Food and Agriculture Organization to cite “growing linkage with outside markets, in particular the impact of ‘financialization’ on futures markets” as a “root cause” of food price volatility in a September meeting. According to CFTC Commissioner Bart Chilton, the number of Wall Street bets on energy prices has increased by 64 percent since June of 2008, when heavy speculation helped push oil prices near $150 a barrel, driving gas near $5 a gallon. The CFTC has long overseen a small part of these markets, with roughly $5 trillion a year in trading. But under the Dodd-Frank financial reform bill signed into law by President Barack Obama, the agency is now responsible for policing a $500 trillion industry. CFTC Chairman Gary Gensler has said regulators will be unable to implement reforms without a significant increase in funding. The Obama administration has proposed boosting the CFTC’s annual budget by 77 percent, from $168.8 million to $298.8 million. That number is small relative to other major regulators — The Securities and Exchange Commission, another key monitor of Wall Street trading, received $1.12 billion last year. In February, Sen. John Boozman (R-Ark.) told HuffPost that speculation in commodities markets was a “legitimate concern,” arguing that it not only affected energy prices, but food prices as well. “The reality is, as commodity prices go up, there’s only a finite amount for food aid and things. People really are going to start dying,” Boozman said. As for Obama’s drilling policies, the president defended his record on drilling earlier this month, stating during a press conference that domestic oil production is at a seven-year high and the administration is willing to dip into oil reserves if necessary. Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources committee, likewise defended Obama during a floor speech last week. He said energy experts have dismissed claims that the administration’s drilling policies led to higher gas prices, arguing uncertainty in the Middle East is a more likely culprit. “First, we need to enable further expansion of our renewable fuel industry, which is currently facing infrastructure and financing constraints,” Bingaman said. “Second, we need to move forward the timeline for market penetration of electric vehicles. Finally, we need to make sure we use natural gas vehicles in as many applications as make sense based on that technology.” Democrats have made oil prices a key talking point during negotiations over the budget, arguing that Republican measures weaken efforts to expand alternative fuel sources. The House GOP budget cut funding for energy efficiency and renewable energy by $786 million from current levels and reduced the Department of Energy’s loan guarantee budget by $250 million. “We find it equally troubling that your preferred budget would cut billions of dollars in investments in critical programs focused on developing new alternative fuels and clean energy technologies, undermining our competitiveness and increasing our trade deficit with oil producing nations,” Democrats wrote in the letter. “We urge you to reverse these policies that will only set our nation backward, and put America’s independence from foreign oil even further out of reach.”

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Kantar Health Names Andrew Miniuks Senior Director, Oncology Market Access

March 22, 2011

NEW YORK, NY–(Marketwire – March 22, 2011) – Kantar Health , a leading healthcare-focused global consultancy and marketing insights company, has appointed Andrew Miniuks Senior Director, Oncology Market Access Europe. In this role he will lead the development and advancement of Kantar Health’s Oncology Market Access Europe publication, support Kantar Health’s growing global oncology practice, and lead and support custom consulting engagements in oncology.

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Bausch + Lomb Appoints Dr. Calvin W. Roberts as Chief Medical Officer

March 18, 2011

New Leadership Role Will Coordinate Global Development and Research Across Business Units for Optimal Outcomes

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H&H Launches AED 300 Million development in Business Bay

March 17, 2011

17 Mar 2011 90% of O14 sold with an occupancy rate of 25% United Arab Emirates, Dubai – 15th March 2011 – H&H Investment & Development (H&H), a Dubai based boutique property developer, officially ann…

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Dubai boutique property developer announces project at Business Bay

March 17, 2011

17 Mar 2011 H&H Investment & Development (H&H) officially announced the launch of their latest commercial development, O14, at an exclusive event held at the tower.  Strategically located in the cente…

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Geithner: U.S. Must Help ‘Nurture’ Emerging Markets

March 9, 2011

WASHINGTON (By Glenn Somerville and Lesley Wroughton) – U.S. Treasury Secretary Timothy Geithner urged lawmakers on Wednesday to approve capital increases for global lending institutions and warned that failure to do so could harm U.S. influence abroad. “We live in a dangerous world, the world isn’t standing still,” he told a House of Representatives Appropriations subcommittee where he sought backing for a $1.24 billion budget increase to $3.36 billion for international programs that Treasury oversees. “Other countries like China are ready to fill any vacuum left by a receding America and we have to take a very careful look when we’re going to cut back things like this to make sure we’re not undermining our core interests,” Geithner said. Geithner cited specific areas in which the United States might lose clout if it failed to be generous. “At the World Bank, failure to finance the capital increase would lead to the loss of U.S. power to veto changes to the World Bank’s government agreement,” he said. “At the Asian Development Bank, if the U.S. does not support this capital increase, we will fall behind countries like China and India.” The Obama administration has been at pains to highlight the need to protect the United States’ ability to project its influence in a world in which conflicts are springing up nearly overnight, as evidenced by unrest in the Middle East and North Africa. Amid uncertainty about the attitude that new regimes may adopt toward the West and with competition for key resources fierce in many regions of the world, U.S. officials want to keep as many channels open as possible for exerting global sway. Secretary of State Hillary Clinton told the Senate Foreign Relations Committee a week ago that it needed to beware the consequences of cutting the U.S. foreign affairs budget. “If anybody thinks that our retreating on these issues is somehow going to be irrelevant to the maintenance of our leadership in a world where we are competing with China, where we are competing with Iran, that is a mistaken notion,” she said. Geithner said increasing U.S. support for global lenders such as the World Bank could lead to more sales abroad of U.S.-made goods. “America needs the (Multilateral Development Banks) to nurture the next group of emerging markets for our exports, to foster peace in countries facing conflict or on the brink of collapse, and to advance our shared values in the world,” he said. In response to questions, Geithner said the administration was working closely with strife-torn countries like Egypt and Tunisia to make sure that assets are protected, and seized if necessary for future return to them. “It is very important as we think about how best to support the political transition underway, (that) we recognize those new governments are going to face enormous economic challenges,” he said. Countries such as Tunisia and Egypt are considered middle-income nations so they would not quality for debt cancellation under existing international debt relief schemes overseen by the World Bank and International Monetary Fund. (Reporting by Glenn Somerville and Lesley Wroughton; Editing by Kenneth Barry) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: EBRD’s Mirow Urges Eastern Europe Economies to Modernize

March 4, 2011

March 4 (Bloomberg) — European Bank for Reconstruction and Development President Thomas Mirow discusses the prospects for growth in eastern Europe. Mirow talks with Maryam Nemazee on Bloomberg Television’s “On The Move.”

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AusTex Oil Limited (ASX:AOK) Announce Placement to Sophisticated Investment Group To Fund Development in USA

March 1, 2011

AusTex Oil Limited (ASX:AOK) Announce Placement to Sophisticated Investment Group To Fund Development in USA

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Peter Neill: Lest We Forget: Re-Calculating the True Cost of Deepwater Horizon

February 21, 2011

Just one more look back, please, lest we forget. The Deepwater Horizon disaster in the Gulf of Mexico provides a telling example of how to calculate the true cost of “progress.” As economists join with scientists, we are moving from observation and study to predictable measurement and advance calculation of the true value of natural resources — the cost of their development, of their loss, of the mitigation and adaptation required by their consequence, and of their implementation without first taking into consideration the broader and deeper financial implications for the community, immediately and downstream. Historically, the conventional corporate argument, typically made to local communities, regulators, and state and federal legislators, has been that the presence of an offshore drilling industry be valued in terms of jobs created, taxes and royalties paid, and value added to the overall financial health of the local, national, and indeed global economy. Given the quarterly financial reports of the oil companies, this evaluation adds up to substantial profit. But so much is left out of the calculation. For example, we tend to forget that the natural resources within any national 200-mile limit are owned by the public and that, as such, government is obliged to exploit that capacity for the national good. In many cases, the legislation enabling the licensing of these resources requires royalty payment frequently designated to restricted funds for specific purposes: scientific research, education, environmental protection or historic preservation. While that may be true on paper, those royalties most often end up not in support of those designated purposes, but in the general fund. Moreover, it is evident that the royalties collected are only a fraction of the market value of those resources, and the profits generated, even after all the substantial costs of administration, exploration, drilling, transportation, refining, distribution, and conversion into innumerable oil-based products, when distributed to the shareholders, represent a not so visible but very real transfer of value from owners to investors, from public sector to private sector, from the many to the few, in not necessarily equitable percentage. Most of us are left out, or in to pay yet again at the gas pump. In addition, government provides enormous public subsidy to the oil industry in the form of incentives and tax credits for exploration and research, technology development, depreciation, and many, many other legislative amendments, regulatory adjustments, and management decisions along the way made for the benefit of the industry. And, of course, there is the continuing presence of politicians and government officials, chosen for their influence, working as lobbyists or sitting on the boards of these companies and expected to avoid direct and indirect conflicts of interest. What, then, is the true value of an oil well drilled a mile down offshore in a unique ecological zone subject to multiple uses? Is it simply the cost of the well or the price of the product? The real calculation must include all the ancillary expense and revenue, and the cost of their loss. When you begin to add up what the public has paid for DeepWater Horizon versus what has been gained — and when you add the hidden subsidy — and when you add the cost of dealing with the immediate consequence of the disaster — and when you add the value of loss to the environmental refugees and communities affected — and when you add the value of damage to the productive ecology and the future revenues lost — and when you add the value of reparation, mitigation and restoration of lost resources going forward — and, ironically, when you add collapsed shareholder investment in a wounded international company — you have a dramatically different equation. From a balance sheet perspective, what in the near term seems profit is in the long term a financial disaster, visualized just a few months ago in the photos of oil slicks, wide and deep, fouled beaches, dead wildlife, destroyed wetlands, unemployed fishermen, bankrupt tourism businesses, depressed local economies, ruined communities — all now rapidly forgotten, business as usual, as BP moves on to Russia. Why would anyone invest in this strategy for the future?

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Lorrie Febus: Bank of China — An Option to the Devaluing Dollar

February 18, 2011

At a time when the U.S. economy is struggling to recover, and there is concern of dollar devaluation, could the Bank of China be offering a new option? For the first time, U.S. citizens will be allowed to deposit U.S. dollars and hold them in Chinese Yuan within the United States. On Jan. 12, 2011, The Wall Street Journal reported : China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country’s plan to foster global trading in its currency. The state-controlled Bank of China Ltd. is allowing customers to trade the yuan, also known as the renminbi, in the U.S Despite personal political views, this could possibly be a hedge against dollar devaluation caused by the Federal Reserve’s monetary easing. Most believe now the yuan is being kept artificially low to keep a favorable trade balance with the US. With China currently experiencing an inflationary economy, many believe this will force the value of the yuan higher. The changes to the IRS policy, including additional reporting for overseas bank accounts makes holding currency in foreign banks more cumbersome. This development with the Bank of China is an interesting hybrid. Holding foreign currency within the US banking system, including FDIC insurance is an interesting option. It seems this may be a good option for holding cash. A few months ago, I wrote an a blog about people in Russia holding their savings in US dollars or Euros to hedge the risk of their own currency. This is the same concept with holding yuan in the US, and just the fact we are able to do so, may be an indication the ‘torch’ as the world’s great economic power, is being passed from the U.S. to China right before our eyes. Currently, the Bank of China has two offices in New York and one in Los Angeles, and anyone interested in opening an account must do so in person. The banks website BOCUSA.com states, The Bank of China limits the amount of yuan that can be converted by a U.S.-based individual customer to up to $4,000 a day, with an annual limit of $20,000. The restriction is designed to fend off speculation in the currency, bank officials say. But there is no limit, at least for now, on the amount that can be converted by businesses, so long as they are engaged in international trading. The bank has no restrictions on the ability by U.S.-based customers to convert the yuan back into dollars. In addition, accounts opened in the New York branches are FDIC insured.

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Marty Zwilling: The ‘Big Bang’ Theory Doesn’t Work for Startups

February 18, 2011

The traditional mode of starting a company is to plan a serial process, where you complete only once all the steps, leading to the “big bang” launch of the company. I strongly recommend a dramatic departure from this model, called “planned iteration,” where you assume you won’t get it right the first time. This idea was well articulated by Paul Graham in an old essay, called ” Startups in 13 Sentences ” in which he talked about “making a few people really happy rather than making a lot of people semi-happy.” One of his key points is that “launching teaches you what you should have been building,” and I agree. All you old software development types will recognize the analogy to the traditional two year “waterfall model” of software development, which has been totally replaced with the Agile iterative methodology. Agile assumes and plans for iterative development, where requirements and solutions evolve as more is known and markets change. Don’t mistake this for a license to launch an incomplete or poor quality solution. Your strategy today should be to define and excellently prepare the absolute minimum product that will excite a selected small segment of your intended customers, and roll it out to them – as a Beta, early promotion, or even a give-away. Then you assess feedback, adjust your offering, and iterate until you get it right (have some very satisfied customers). Plan on multiple small launches, with iterations, rather than a big launch. Here are the advantages I see with this approach: Faster time to market. If you launch fast, you can be working with real customers in 4-6 months from your start, rather than 1-2 years. In today’s fast moving marketplace, needs, competitors, and costs change rapidly, so even if you were right, two years later the wave has moved on. Equally likely, your first target was wrong, and you will need to adjust. Get traction before funding. Let’s face reality, the angel or VC funding process now takes 4-6 months of almost dedicated effort and time, and usually fails because you don’t yet have a product or customer. By using a laser focused approach for the first iteration, you may actually produce something and get a customer without funding. Now investors will pay attention, since scale-up funding is less risky and has a time frame. Find customers, partners and channels early. There is nothing like a real customer pipeline to convince you that you need partners and channels, and to convince partners, channels, and investors that you are real. Get out there personally and find that first customer. It will narrow your development focus, and adjust your strategy for you. Spend your time finding renewable sources of customers and iterate. Use social networking to start the wave. Costs are low these days to set up a credible website, do some search engine optimization, start blogging, and start mining the social networks for interest. It won’t cost you your whole funding pot to start some momentum, or to realize that your original strategy needs major tuning. Think about it. Where did Google, eBay, and Facebook come from? They inched their way into public view before the first multi-million dollar funding rounds, and they have never had a big public launch. New product companies in the offline world start one store at a time, or in one geographic area. Big bang product launches are the domain of big enterprises, and you can never match their clout and budget. The biggest advantages you have as a startup are speed and agility. Use them.

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North Dakota Oil Boom Outpaces Oversight

February 17, 2011

BISMARCK, N.D. — Understaffed and overwhelmed, government oilfield inspectors are struggling to provide adequate oversight amid an explosion of activity in North Dakota’s oil patch, state and federal officials told The Associated Press. Hundreds of oilfield spills and thousands of waste disposal sites are being untended or are infrequently monitored because of a lack of personnel and funding, the officials said. And the staffing limitations come at a time when the industry – and a popular former governor – have pushed for a cut in state oil field taxes that help fund such monitoring programs. “It’s a fire drill every day,” Lynn Helms, director of the state Department of Mineral Resources, said in an interview with the AP. “We need more properly trained enforcement people helping the industry stay on track.” Oil production in North Dakota has boomed with the development of the Bakken and Three Forks formations, but oversight has not kept pace. Helms said the agency’s staffing is designed to handle 100 rigs and about 5,000 wells, whereas a record 169 rigs were drilling on Wednesday and more than 5,300 wells were pumping oil. About 2,000 more new wells are expected by the end of the year, Helms said. Moreover, he said the agency has funding for 13 inspectors though only 12 are on the job at present. Agencies that oversee oil production on federal land face some of the same inspection-staffing woes. The state inspectors, who are geologists or engineers, inspect the construction of new wells, disposal wells that hold waste and abandoned wells. They monitored a record 1,213 new wells last year, visiting each site at least six times during the three-week construction phase, Helms said. The inspectors ensure, among other things, that the steel pipe driven into the ground and cemented into place is done correctly to prevent groundwater contamination. Helms said the oversight of well construction is adequate but other monitoring is lacking. Nearly 900 disposal wells that hold saltwater, a byproduct of oil production, and about 5,200 sites that hold other oil waste are being monitored only twice annually at best, agency records show. They should be visited at least six to 12 times a year “to keep bad things from happening,” Helms said. Records show at least two wells that companies abandoned in the state’s oil patch have gone unplugged. The so-called orphan wells pose some of the biggest threats to groundwater supplies if not plugged correctly, but Helms said the agency doesn’t have the people or the funding to cap the wells at present and that’s dropped down the priority list. “Production has gotten ahead of oversight and without the resources to protect the environment and health, you have a worst-case scenario,” said Wayde Schafer, a North Dakota spokesman for the Sierra Club. “Yikes.” State Health Department records show 614 oil field-related spills were reported by companies last year, up from 478 in 2009. The number of reported spills this year – 127 through Wednesday – appears on pace to set a record. Dave Glatt, director of the state Health Department’s environmental health section, said most spills are minor and are cleaned up quickly. Only 10 have resulted in fines or other sanctions in the past year, he said. Glatt could not say how many oil field spills inspectors personally observed, saying, “we look at as many as one or two people can do.” The agency has had just one field inspector but recently shifted two workers from other duties, Glatt said. Helms’ agency has a two-year, $11.6 million budget for the fiscal cycle that ends June 30. It is asking for a $2.6 million increase in the next budget cycle, which Helms said would allow for about a dozen more oilfield inspectors. Ron Ness, president of the North Dakota Petroleum Council, said his group that represents about 250 companies supports a bigger budget for inspectors. “It is a heavily regulated industry but you’ve got to have enough regulators there to make sure it’s being done right and we support it being done right,” Ness said. Funding for the inspectors comes from the state’s 11.5 oil tax rate, which oil industry officials and former North Dakota Gov. Ed Schafer have pushed lawmakers to cut – though the state House defeated the proposed cut on Tuesday. “Yes, we don’t have enough inspectors . . . but lowering the oil taxes doesn’t affect inspectors and oversight,” the former governor said. “This is a legislative issue. We have not been spending the money properly that’s coming off the resource.” North Dakota is slated to collect about $961 million in oil taxes during its current budget period, and oil tax collections are expected to top $2 billion during the 2011-13 budget cycle. The U.S. Forest Service, which monitors oil and gas drilling and production on North Dakota’s federal grasslands, monitors about 600 active oil wells at present but expects to oversee about 350 more in the next decade. It is keeping pace with activity at present with its 18 inspectors, but would like to add at least three more – though federal budget constraints may keep that from happening, said Larry Melvin, mineral manager for the Forest Service. “We’re in the same pickle as the state,” Melvin said. Keeping pace with the booming oil activity on tribal land also has been a struggle, said Jim Albano, a spokesman for the Bureau of Land Management, which oversees oil development on the Fort Berthold Indian Reservation in western North Dakota. The number of oil-related projects has risen from 13 in 2008 to 113 last year, and another 57 projects have been proposed so far this year. The agency has increased its inspection staff from four to six but would like to even more. About 160 wells have been drilled on the reservation so far and the BLM is forecasting the number to rise to 1,000 by 2018. “It’s a challenge and it’s putting a lot of pressure on our staff,” Albano said. “Certain things are stacking up.”

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Jeffrey Korchek: Are Studios Dead?

February 17, 2011

While it may be true that in the movie business nobody knows anything, although I imagine James Cameron begs to differ, what about other businesses? Steve Jobs seems to know exactly what we want in elegantly styled electronics products, even before we do and even if they aren’t quite perfect. Jeff Bezos knows how to sell us almost everything we want online — and we thought he’d never make it past books. And how about that guy at Groupon who just turned down $6 billion for a company that didn’t exist 3 years ago and has zero barriers to entry in its business plan — he must know something. Of course, you can forget about Jesse Eisenberg/Mark Zuckerberg — he knows, what, about 600 million somethings. So, what does this have to do with movie studios? Well, it’s possible that the General Motors model of a studio — to paraphrase Alfred P. Sloan, “a movie for every person and purpose” — where one studio and its executives try to make a steady stream of comedies, dramas, genre pictures and those $200 million-plus things that hold up tents, is over. With studios’ high overhead and proven inability to control costs on one hand, and the daily onslaught of new technology that takes their product from them in ways they can’t understand and pays them less per viewing on the other, the very model of a modern major studio may just be dead. It’s a mixed up muddled up shook up world if you’re a major studio; everything that should go up is just going down — movie admissions, cable TV subscribers, and most dramatically DVD sales — while the wrong things — motion picture production and distribution costs, Redbox rentals, internet streaming and Netflix’s share price — all keep going up. Only the steady rise in the average price of movie tickets — up 5% in 2010 over the prior year, keeping box office results flat while attendance fell 5.3%, makes the business seem in okay shape. But, it’s not. Especially if you plot rising ticket prices and falling attendance on the same x:y graph and think about where that ends up. In the past, when studios green-lit their movies, theatrical performance was always the variable with video revenue and cable output deals a given, escalating based on box office gross. But now, with DVD sales down 33% over the past four years and cable networks like Showtime less interested in studio output deals, how can a studio even begin to green-light a movie based on historical revenue assumptions that are unlikely to be accurate 12-18 months later when the picture comes out? The existing major studios are all part of very large corporations, so their continued existence is not in jeopardy. Their corporate parents may get tired of owning them, like General Electric, but a bad movie or a few years of them isn’t likely to put them out of business. And while now nearly everybody can make a movie (but not necessarily get it released) the major studios still do something that other movie companies can’t: produce, distribute and market motion pictures on a worldwide basis, in all possible media and, of equal importance, collect the money. What the major studios don’t seem to be able to do, however, is adapt their current business model to the new world. They’re still making a yearly portfolio of unrelated movies with decision-making done on an incremental basis, paying big participations on expensive star-driven pictures in success (maybe less first dollar gross but then it’s just a participation pool with a minimal or no distribution fee and 100% of video income thrown in), while owning all the failure. While studios can say that financing partnerships lessen their risk, they also lessen the upside, which is what you’re in the movie business for in the first place. It’s possible, then, that the better model is the one practiced by Apple, Amazon and yes, Jim Cameron: do what you do, do it better than anybody else in a way or volume that allows you to exact a premium, build brand loyalty and keep your competitors out. Apple, Amazon, Groupon and the Facebook, despite their different businesses — one sells stuff they make, one predominantly sells other peoples’ stuff, one allows other people to sell their stuff to people who otherwise wouldn’t buy it, and one allows everyone to sell themselves — have something very important in common: a direct relationship with their customers and customers’ affinity for their brand. Studios long ago ceded that relationship. Back when, when people actually went to the movies every week, that relationship existed and studios had individual identities. And they controlled all aspects of the motion picture process — the talent, the production, distribution and exhibition of the pictures and the publicity surrounding them. Those days, of course, are long gone for a variety of reasons: crushing overhead, the Justice Department, technology the studios didn’t control and lack of foresight. The world is a different place, and movies may just have a different place in it. For the large corporations that control the 6 remaining major studios, what is the maximum point of leverage, and therefore revenue potential: producing content or controlling its distribution? With the high cost of producing content, a studio wants to maximize distribution of its product to consumers, but some of the alternatives, Redbox rentals for $1 or unlimited streaming on Netflix for $9.99 a month and whatever Amazon may do generate relatively minimal revenue and commoditize the product that the studios spend so much to make. And here the movie business is unique as the cost of making movies is totally separate from the price at which they’re sold, and increased costs cannot be passed on to consumers. So as a studio you’re torn between getting your content out there in the form that consumers demand while trying to retain some control so you’re not, say, merely providing a loss leader to companies who’s main business is something else, like electronic devices. In the future, fortune will favor the content producers with direct access to consumers, especially in the home and through the electronic devices that serve as extensions of the home — News Corp. which controls Fox and Direct-TV, Comcast with its purchase of NBC-Universal and Disney with its network and cable channels and its brand that guarantees access and Apple in its back pocket (actually it’s the other way around). Warner, which recently spun off Time-Warner cable, has the sheer power of its size. Paramount and Sony are riskier; the former with less connection to the home and the later with a foreign parent preventing ownership of a network (Is it odd that we allow foreign governments to own a good part of our country through Treasury bonds and other investments but we won’t let them tell us what to watch?). Now, don’t let me go all Peter Bart on you but here’s a memo: what the movie business needs is a unified plan and someone to lead it. Where is the movie business’ Steve Jobs, the person who knows what people want to see before they do, knows that giving content away for free on the internet isn’t such a good idea and who creates excitement, brand loyalty and an enduring corporate culture? Or is the development and production process for movies just too attenuated so that what once seemed like a good/clever idea isn’t when it finally gets made and released? And, is it unrealistic to expect that the same group of executives can effectively manage a diverse slate of 20 pictures, year in and year out, especially given the cost of all that? Before, even without enlightened leadership we could count on the intersection of self-interest and money to secure a future for the movie business. But now, with so much uncertainty in the economy, turbulence in the distribution of motion pictures, reduced shelf space for DVD’s at Walmart and maybe no shelf space at Blockbuster, and with the stakes so high because of the costs, there is no safe harbor. While change may be a natural cycle of any market economy, the motion picture business has to be careful to not bring it upon itself. Schumpeter would call this “creative self-destruction.” To avoid this, there must be a consensus among studios, talent and their representatives and unions. The unanimity with which the studios generally approach union negotiations should be brought to bear on distribution windows, technical standards and other forms of distribution, as well as talent relationships, just so long as cooperation stops short of collusion. If a secure future for studios is no longer merely controlling a vast library, it must be controlling the destiny, and exploitation, of their product. And in that, what is the defining relationship? It is the one with the consumer. It’s what Apple has mastered with their products, their stores; their community. It’s what Netflix has done by making its streaming service available on over 100 platforms — truly Movies Everywhere. That’s what studios or their corporate parents need to create and if it’s not through their content, it’s through how that content is delivered to the consumer. Consumer products companies create that relationship through brands, reaching through the retail outlets for their product to consumers. But movies aren’t really brands (and neither are stars; they, like Soylent Green, are just people) — brands offer security, status by association and trust, not to mention premium pricing. Movies are individual products that have one weekend to make a first, and lasting, impression on their audiences. Studios risk their future by ceding the relationship with the consumer to all those who sell their product.

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Versartis Completes $21 Million Series B Financing

February 16, 2011

New Funds Will Support Clinical Development of Long-Acting Human Growth Hormone

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Buccaneer Energy Limited (ASX:BCC) Advise That Alaska Industrial Development And Export Authority Moving Forward To Conclude Jack-Up Rig Acquisition

February 16, 2011

Buccaneer Energy Limited (ASX:BCC) Advise That Alaska Industrial Development And Export Authority Moving Forward To Conclude Jack-Up Rig Acquisition

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Ram Power Announces Walter M. Higgins as Interim CEO Following the Resignation of Hezy Ram

February 14, 2011

RENO, NV–(Marketwire – February 14, 2011) – Ram Power, Corp. ( TSX : RPG ) (“Ram Power” or the “Corporation”), a leading renewable energy company focused on the development, production and sale of electricity from geothermal energy, announced today Mr. Hezy Ram has resigned as President and Chief Executive Officer of Ram Power and as a member of the board of directors (the “Board”) of Ram Power, effective immediately.

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Dan Dorfman: Worrisome Words From Jordan

February 12, 2011

As an independent trader of stocks, bonds and commodities who tells me he was up more than 100% last year and is humming again in 2011, Caise Hassan’s thoughts on the financial markets would seem to be worth a lot more than his views on the Mideast turmoil. Maybe not. Chicago-born Hassan, the 38-year-old son of Palestinian-born parents, makes a point of keeping close tabs on what’s happening throughout the Persian Gulf. And he doesn’t have to travel too far to do it since he and his family live in Amman, Jordan. The ouster of Egyptian president Hosni Mubarak may be good news for the country’s 80-million populace, but is it good news for the U.S. stock market? Or bad news? And what about the Mideast, in general? While there are some worriers, it all seems to be an irrelevant issue for now as far as most of Wall Street goes. Except for a one-day drop of 166 points on January 28 in response to the Egyptian riots, the market has pretty much been on an upswing throughout the revolution. In other words, the Egyptian uprising was a ho-hum and most Wall Streeters seem to think it will likely to remain that way despite the unknowns of what’s ahead. In particular, no one knows what the country’s new leadership will look like, whether it may be infiltrated by Islamic radicals and the Israeli-hating Muslim Brotherhood and if Egypt’s peace treaty with Israel will remain intact. Hassan thinks it would be foolhardy for Wall Street to assume that all is now okay in Egypt since he believes it will likely take a year to form a stabilized government. Like many Mideast watchers, he sees aftershocks and a good deal more turmoil ahead in the region, given the economic plight of many of its residents. One down, more to come! That’s basically his view of the change in Egypt’s leadership. His outlook calls for more Mideast strife from uprisings in a number of other countries, notably Bahrain, Syria, Jordan and Algeria. He believes this cleansing process — as some call it — of the region’s dictators could seriously impact the U.S. market on a number of counts. In particular, Hassan points to possible interruptions in the steady flow of oil from the Mideast and the ability of the U.S. to sell its products, such as military hardware and consulting services, to Gulf countries whose monarchs may be overthrown and provide us with about 18% of our oil. For starters, he sees the prospects that Jordan — beset by poverty, lack of jobs and a vicious secret police — is highly vulnerable to deep social unrest, and, in fact, thinks we could see the same kind of riots that plagued Egypt in a matter of months. In this case, he believes, they would be bloodier since there are a lot of unhappy armed groups there. “Moderate” Jordan, observes Hassan, is receiving more than $400 million in aid that ostensibly is going toward the development and democratization of a country that is, more realistically, he contends, is being used to tame its people and shield from accountability a heinous monarch (King Abdullah, the 11) whose most notable achievements are blowing tens of millions in Vegas casinos and adding luxury cars to the billion-dollar collection begun by his equally reckless father. He also notes that if the popular forces in Egypt (unions. professional associations and the Muslim Brotherhood) form a government, it is unlikely the new regime will keep buying $2 billion in military goods and services from the U.S. and that could cause a tinge on arms contractors’ balance sheets. An even greater profit danger, he points out, looms if revolutions spread. That is, if governments from Morocco to the Gulf stop buying planes and bullets, the tech sector will be reeling. What about the assorted financial markets? Hassan thinks the U.S. stock market has more to go, especially with Bernanke hinting he will print more money. The commodity markets, he believes, are nowhere near oversold in the long term, and that certain commodities, like gold and silver, have a lot of room to run over the next few years no matter what happens. He notes that if governments in the Middle East get overthrown, oil will go up. And if they don’t, the Chinese will buy it at $80 a barrel. So what’s the bottom line on the Mideast. Maybe Samuel Morse of Morse code fame sums it up best with his observation “What hath God wrought?” What do you think? E-mail me at Dandordan@aol.com.

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Brendan Smith: New Study Reveals the Benefits of EPA Regulation for Workers

February 10, 2011

You can hear the echo chamber reverberate the talking points: • The Independent Petroleum Association of America complains that drilling permits and pollution are curbing job growth. • The head of the National Association of Manufacturers and the governor of Virginia write a joint article called “Proposed EPA rules could hurt job growth.” • Presidential aspirant Newt Gingrich calls for the abolition of the Environment Protection Agency because of its “job-killing nature.” • Sen. John Barrasso, introducing legislation to gut EPA authority, calls his bill the “Defending America’s Affordable Energy and Jobs Act.” • Thirteen freshmen Senators begin their letter asking EPA to allow more pollution from industrial boilers by saying, “We are committed to protecting the jobs or hardworking Americans.” • New House Majority Leader Rep. Eric Cantor in his first floor speech attack “job-killing government regulations.” • Even some Democrats, such as Senator Jay Rockefeller, plan to introduce legislation to prevent the EPA from regulating greenhouse gasses, maintaining it is a threat to jobs. Should workers and our organizations trust oil companies, corporate leaders, and their political spokespersons to be telling the truth about the impact of EPA regulation on jobs? Or should we first take a good, hard look for ourselves? A study just released by Ceres and the Political Economy Research Institute of the University of Massachusetts examines the jobs effects of some of the new regulations, specifically ones that have been harshly attacked by EPA critics. This well-documented study finds that far from being “job killers,” the new regulations will create nearly 300,000 new jobs, especially skilled, high-pay jobs for engineers, project managers, electricians, boilermakers, pipe-fitters, millwrights, and iron workers. Ceres (pronounced “series”) is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change. The Poliical Economy Research Institute (PERI) is an independent unit of the University of Massachusetts, Amherst, with close ties to the Department of Economics. The new study joins a large number of previous studies showing that EPA regulation, in addition to protecting the environment and the public’s health, also serves as a job-growing economic stimulus and development program for the American economy. These studies directly contradict the endlessly repeated mantra that environmental regulations are “job killers.” The University of Massachusetts study is called Clean Air/New Jobs: Employment Effects of Planned Changes in the EPA’s Air Pollution Regulations. It focuses on the 36 states in the eastern half of the US that generate nearly three-quarters of the country’s electricity. It assesses the impact of two Clean Air Act regulations expected to be issued in 2011. One is the Clean Air Transport Rule (“Transport Rule”) regulating sulfur dioxide and nitrogen oxide emissions. The other is the National Emissions Standards for Hazardous Air Pollutants for Utility Boilers regulating mercury, lead, arsenic, and other pollutants (“Utility MACT”). These are among the new regulations that critics have charged would put “hundreds of thousands of jobs” at risk and “cost the United States 40,000 to 60,000 jobs a year.” The study evaluated what will happen if the EPA issues stringent compliance requirements. It anticipates that these requirements will be met by putting pollution control equipment like scrubbers and particulate controls on all coal-fired power plants by 2015 and replacing some aging, less-efficient plants with new, less-polluting ones. The study includes both jobs in the plants affected and jobs affected in companies that provide goods and services to them. The study finds that between 2010 and 2015, investment to meet the new regulations will produce 1.46 million job-years in the 36 states studied. That is the equivalent of 290,000 year-round jobs for the entire five-year period. Some of the jobs will be for making and installing the pollution control equipment and new power generation capacity by making and installing turbines, compressors, pipes, iron and steel products, environmental control machinery, and construction, creating jobs in construction, metal fabrication, and engineering. Others will be in the industries that supply products and services, including steel manufacturing, catalyst system manufacturing, control system manufacturing, and transportation services. They would involve such fields as engineering, coal, natural gas, metal fabrication, construction, and business services. The new equipment will need permanent operations and maintenance workers to run it. At the same time, some jobs will be lost as older, less efficient power plants are phased out. The study finds that 22,000 new jobs will be created while 18,000 will be lost, for a net gain of 4,000 jobs. Many of the older plants will be phased out not because of environmental regulations, but because they have become unprofitable due to low natural gas prices, reduced demand, and high production costs due to inefficient technology. The regulations will lead to net job increases of more than 120,000 job years in Illinois, 123,000 in Virginia, 113,000 in Tennessee, 76,000 in North Carolina, and 76,000 in Ohio. In every state in the region studied, the number of new jobs created is higher than the number lost. The study points out that regulation will have many other benefits in addition to increased employment. It will ensure cleaner air, improve public health, promote more efficient, more competitive technologies, reduce greenhouse gasses, and increase state tax revenues. And it will stimulate “induced jobs” that result when workers have money in their pockets to buy things made or sold by other workers. Scare talk that EPA regulation will “kill jobs” has a long history, going back to origins of Federal environmental protection. For example, the US Business Roundtable sponsored a study maintaining that as a result of the 1990 Clean Air Act amendments, “There is little doubt that a minimum of 200,000 (plus) jobs will be quickly lost, with plants closing in dozens of states. This number could easily exceed one million jobs — and even two million jobs — at the more extreme assumptions about residual risk.” In the eight years following the amendments, however, fewer than 7,000 jobs were lost in the entire country, and they were compensated many times over by new jobs in pollution control. Many previous studies have documented the beneficial effects of EPA regulations. For example, an Office of Management and Budget study found that, in addition to cleaner air and better public health, EPA regulation under the Clean Air Act has provided four to eight dollars in benefits for every dollar spent on compliance. Another OMB study found that EPA air and water regulations from 1999 to 2009 cost $26-29 billion annually but produced benefits from $82-533 billion. EPA regulation has led to the development of the rapidly growing environmental control industry. It has encouraged technical innovation, such as the development of catalytic converters, which has made the US one of the world’s leading exporters of environmental control technologies. What about those who lose their jobs as a result of the closing of older, inefficient power plants? This is a question that organized labor should take head on. Just as the Federal government took responsibility for dealing with the effects of closing of military bases through the Base Realignment and Closure (BRAC) process, so the Obama administration should take responsibility for the workers and communities affected by power plant closures. A public policy strategy could draw on such existing programs as the Department of Labor’s Rapid Response Services and the National Emergency Grants of the DOL’s Employment and Training Administration, as well as funding for economic development and industrial efficiency and modernization from the Departments of Energy and Commerce. The cost of compliance with EPA regulation is generally less than two percent of total business costs. The idea that companies will shut down or go abroad to avoid such costs is ludicrous. However, companies often try to blame shutdowns and runaways on environmental compliance costs as a way to displace responsibility from other causes, such as new technologies, increased productivity, fluctuating energy prices — and their own corporate strategic decisions. It’s not hard to see why the companies being required to clean up what comes out of their smokestacks intend to fight it as a deduction from their bottom line. Nor is it hard to see why they would exploit America’s jobs crisis to bamboozle workers into letting them poison the atmosphere for free. But that doesn’t mean that it is in the interests of workers or of the American people to agree. Before we accept their argument, we must ask: Is the attack on EPA regulation really an effort to protect America’s jobs? Or is it an effort to protect Corporate America’s bottom line?

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Don Tapscott: The State of the World: 10 Belated Reflections on 2011 Davos

February 9, 2011

It is my custom after attending Davos to formulate my top 10 reflections. These are not necessarily the top issues discussed at Davos but rather some observations about the state of the world. 1. The Age of Wiki Revolutions Not surprisingly, the historic events in Tunisia and Egypt captured the attention of many at Davos. The timing was impeccable, reminding some of the Davos conspiracy theory — that the world’s leaders organize big events to time well with the Davos meeting. Tunisia and Egypt are examples of a new species of revolution based on social media. Traditional revolutions have a leadership and are positioned to take power with popular support. The new “wiki revolutions” are so explosive and happen so fast, that there is no clear vanguard to take power, leaving a vacuum. The vacuums that result pose significant challenges for everyone who cares about moving from oppression, dictatorship and fundamentalism to openness, democracy and 21st century governments. Appropriately, Tunisia’s so-called Jasmine Revolution was hailed by many as a model of social and democratic revolution in the Arab world. “We are going to leverage social media to build a horizontal democracy rather than a vertical democracy,” said Yassine Brahim, Tunisia’s new minister of infrastructure and transport. The new governor of Tunisia’s central bank, Mustapha Kamel Nabli, went to Davos to reassure attendees and the international media that Tunisia was getting back to business as normal. Nabli said Tunisia plans to move forward following the toppling of President Zine al-Abidine Ben Ali. “The situation is stabilizing and security is back. This means that democracy has taken root. We have come a long way. People had had such depressed feelings for so long that something had to break — which was fear of the regime. When it was removed everything happened very quickly.” “I would like to convey to investors that that the country has returned to business. Democracy is good for investment,” Nabli said. Foreign companies will be “doing business in a much more favorable environment.” He promised corruption would be replaced with transparency, and asked international investors not to flee the country or speculate in ways that would hurt the economy. Yes, everyone was left wondering: what country is next? And how will each of these wiki revolutions play out? 2. Bifurcated Norms for the New Realities The theme of Davos was “Shared Norms for the New Realities.” It reflects what the Forum organizers say is the top global issue: The world is increasingly complex and interconnected, and, at the same time, experiencing an erosion of common values and principles. This undermines the public’s trust in leadership, which in turn threatens economic growth and political stability. In the words of the WEF’s founder Klaus Schwab, we need to “concentrate on defining the new reality and discuss which shared norms are required for making global cooperation possible in this new age.” Compared to previous Forum meetings, there is growing awareness by corporate executives that business can’t succeed in a world that is failing. Environmental sessions at Davos used to be attended by environmentalists only. Now the participation is much broader. This year serious business leaders spoke convincingly of their responsibilities for helping develop a globally sustainable economy. A broad cross-section of business leaders spoke of the urgency of helping Africa. I chaired two sessions. The first was “Rethinking our Institutions for the New Realities.” The second was about how young people around the world share a positive new culture and set of norms, but were bumping up against “old models.” At both sessions there was a rich, sometimes exhilarating discussion about the need for change. But when it comes to norms being shared we’ve got a long way to go. In fact, a bifurcation is underway. Many CEOs, government leaders, economists and media still view the world in traditional ways. The biggest disconnect was about the state of the global economy. Many executives are quite comfortable with the status quo. They think the financial and economic crisis is over and that we’re now coming out of a predictable and traditional business cycle. Implicit in this view is that there are no truly new realities, just variations on the age old business rhythms. According to the typical CEO, especially bankers, all is well. Profits are good and bonuses can’t be far behind. It was reported last week that the top five U.S. banks will pay staff a combined $119 billion for 2010, up 4 percent from 2009. Nevertheless, bankers insist the proper tonic for other sectors of the economy is austerity. Writing from Davos for States News Service, Simon Johnson noted that “Leading bankers, in particular, insisted on the paramount importance of providing unlimited government support to their sector during 2008-09; now they insist with equal or greater vigor that support to all other parts of society be curtailed.” These business leaders are trying to turn back the clock. When they see any signs of improvement they have a natural inclination to fall back on old ways and conclude it is business as usual. This is a big problem. Those who say the global economic crisis is over are wishful thinkers with a false sense of comfort. There were bifurcated norms on many of the issues discussed. Some were uneasy at the uprising in Egypt, insisting this was bad news and that such instability would be harmful for business. They preferred the old paradigm where the West supports any government — including despots and tyrants — if it suits the West’s strategic interests. This was in sharp contrast to those who saws Egypt’s turmoil as an opportunity for democracy, social justice and economic prosperity. They believe that the main problem for economic growth in the Mid-East is that it is run by despots who act as a brake on their local economies. They agree with the young people tweeting from Tunisia and Egypt that “Democracy is good for business.” 3. A New Era of Global Risks We haven’t come to grips with what it means to live in a networked and increasingly interdependent world. There are traditional risks like nuclear war, terrorism, climate change, infectious diseases, economic crisis and failed states. But new risks are emerging everywhere. Consider something as seemingly mundane as the global supply chain. The vast networks that provide the world with food, clothing, fuel and other necessities could handle an Iceland volcano and one other catastrophe like the failure of the Panama Canal. But according to experts, a third simultaneous disaster would collapse the system. People around the world would stop getting food and water, leading to unthinkable social unrest and even a disintegration of civilized society. By tackling this issue, the Forum is filling a void that no other organization addresses. It gets people talking constructively, in sharp contrast to the recent failures of other bodies such as the Doha Development Round of the World Trade Organization and the Copenhagen Conference on climate change. This year the Forum inaugurated a Risk Response Network. Risk Officers from top corporations, governments and international organizations will be brought together online. They will draw on insights from the Forum’s communities and contributors, including expert Forum working groups and a network of the world’s top universities. If some new global crisis arises, these leaders could spring to action on a secure network, drawing on insights from the any of the Forum’s 50 communities. It is hoped that rather than just reacting to unanticipated problems like the European Sovereign Debt Crisis, leaders could be more proactive and take preventive action. Chancellor of Germany Angela Merkel warned participants against being complacent about the risks of a further financial crisis, saying that the international mechanisms needed to prevent another crash are not yet in place. She stressed that Germany stands firmly behind the Euro and will continue to defend the currency. 4. For Growth to be Sustainable it must be Inclusive In the Davos wrap-up communiqué this was one of four themes, but again there were big differences in the views of participants. Some CEOs don’t really care, believing that the world economy can continue to grow without concern for how the wealth is shared. As far as they were concerned, the global economy is back on track and business is back to usual. I said you can’t call it a recovery if it’s not inclusive. The people at the very bottom aren’t benefiting. Huge parts of the world are mired in economic stagnation. This has huge risks, as is illustrated by the developments in Egypt and Tunisia. In one television interview I argued that we’re in more than a global slump. The journalist challenged me, saying “what slump – economy is doing great, already running at 4 percent growth.” I replied that he should tell that to the millions of young people who are unemployed – to them the term jobless recovery is an oxymoron. The incident was reflective of the divide. United Nations Secretary-General Ban Ki-moon said that a “revolution” is urgently needed in thinking and policy to bring about sustainable economic growth that can both protect the environment and raise living standards. Chanda Kochhar, managing director and chief executive officer of the ICICI Bank of India, said we will only make growth sustainable “if we make our growth inclusive.” Greek Prime Minister George Papandreou said there had been a “race to the top” among the rich. More and more wealth was concentrated in fewer hands, while the middle and working classes were being forced to make do with less and less. Despite the well-meaning concern, there was inadequate about how to achieve inclusive growth. In the United States 80 percent of new private sector jobs come from companies less than 5 year old. But smaller companies are having a tough time. There is lower demand due to recession and some behavioral change from consumers along with very high levels of uncertainty in the economy. There is a credit crunch as banks are not lending money and there is a lack of venture funding. Internationally the situation is ever more complicated. These problems need to be addressed with fresh thinking. 5. The Potential of a New Global Youth Radicalization As the events of Tunisia and Egypt unfolded I became convinced that a new youth radicalization is underway. First, there is a massive generation of young people coming of age. Born between 1977 and 1997, the children of the baby boom in North America outnumber their parents. The echo is larger than the boom itself. In South America the demographic bulge is huge, and even bigger in Africa, the Mideast and Asia. A majority of people in the world are under the age of 30 and a whopping 27% under the age of 15. Second, despite the digital divide, this generation is the first to grow up digital. They have been bathed in bits; computers, the internet, and interactive technologies are a fundamental part of the experience of youth. To them, technology is like the air. When young people today use digital devices, they are interacting, searching, authenticating, remembering, collaborating, composing their thoughts, and organizing information. They interact with the media and know how to inform themselves and use technology to get things done. Third, as they become adults, they are entering a world that is broken. Youth unemployment is high around the world. In Spain more than 40 percent of young people are without work. In France the rate is over 20 percent. Many failing institutions are in need of reform. Throughout the Mideast there are undemocratic regimes with few human rights. Women want to be part of the work force but in many countries are denied full opportunities to do so. Put these three factors together and there is a perfect storm brewing. During the 1960s there was a generation gap where young people and their parents had different attitudes towards many things, from civil rights and women’s role in society to war. The youth radicalization of the time brought about significant changes in society, among them the end of the war in Vietnam. But this time is different. Today a huge, deeply frustrated generation has at their fingertips the most powerful tool ever for finding out what’s going on, informing others and organizing collective responses. The leaders of Iran, Tunisia, Egypt , Syria, Saudi Arabia or even China can take steps to prevent them from communicating with new media, but ultimately this will not work. Turning off the Internet, as Egypt has tried to do, only broadens dissent as outlying nodes on the human network become engaged and for everyone the best way to communicate is to come into the streets. Further, as the Internet becomes an essential part of the economy’s infrastructure, shutting it down is akin to self-inflicting a general strike. 6. Oblivious Bankers Take the Offensive At last year’s meeting, the prevailing mood was that banks needed to be reined in, the sooner the better. US banking executives used to be the stars of Davos, but the last two years they were a low-key, humble and dour-looking group. I remember my wife and I attended the reception one of the world’s largest financial institutions and were greeted with eerie enthusiasm by a welcoming line of the CEO several of his top execs. They stood at the door in a wedding-style line greeting, thanking every guest. They were just delighted to have some new faces at their sparsely attended event. Even the Wall Street Journal reported that an international backlash at Davos has “bankers are on the run.” What a difference one year can make. In private, and sometimes in public, top bankers were hitting back, warning that the mind-set of increased regulation was jeopardizing the economic recovery without making the system any safer. The Times (UK) reported that Jamie Dimon, the chief executive of JP Morgan Chase, led the attack, which provoked a furious response from French President Nicolas Sarkozy. Gary Cohn, No 2 at Goldman Sachs, warned the new rules would merely ensure that the next crisis was in the unregulated world. The Times also reported that people close to Tim Geithner were privately exasperated by Cohn, even before it emerged that his boss Lloyd Blankfein’s compensation had been a salary of $2 million and $12.6 million in shares. 7. Asia, Asia and More Asia When it comes to talk about the Asian Tigers, India displaced China this year, including hosting the final gala that was a technological and cultural tour de force. But the region’s biggest individual star was Russia’s President Dmitry Medvedev, whose speech notes were conspicuously on an iPad. Obama might have to stand down as the Internet President. Medvedev presented ten reasons investors should flock to Russia and it was impressive. The government has begun an unprecedented economic modernization program, including uniform regulation to make it attractive to investors. Russia hopes to join the WTO and OECD and is working to establish a common economic area with the European Union. The government is promoting innovative joint ventures as part of a massive technological modernization program and a great number of enterprises will be working on the development of Russia’s Innovation Center Skolkovo. The Russian government will also pass laws to protect intellectual property rights. The country is striving to be more energy efficient and implementing programs to expand broadband technology throughout the country. In the next ten years, thousands of Russia’s leading minds will receive masters and doctorate degrees in the world’s top institutions and will take leadership roles in Russia’s economic development strategy. Finally, the country has launched large scale infrastructure projects, including having obtained the right to host major global sporting events. Medvedev’s speech came just two days after the deadly terrorist attack on Moscow’s Domodedovo airport. Medvedev told attendees that “All our efforts to further develop the world economy will be for nothing if we fail to defeat terrorism, extremism and intolerance, and if we fail to eradicate altogether these evils which are the greatest danger to mankind.” Indonesia, the world’s fourth most populous country, also considerable buzz. Indonesian President Susilo Bambang Yudhoyono attended the Forum along with a number of his ministers and senior officials. Indonesia has a lot of poverty, and Yudhoyono warned about the fallout of recent increases in food and energy prices, which “impact inflation and poverty, and could lead to social and political unrest.” Yudhoyono also used Davos to network. “In terms of investment, Davos is an extraordinary place for us to build networks because this forum is attended by more than 1,000 chief executive officers from more than 1,000 companies,” Trade Minister Mari Elka Pengestu said. But in the talk of India surpassing China as the world’s economic juggernaut was most interesting to me. India has the advantages of being a more open and less hierarchical society. China’s disciplined command-and-control style work force could ultimately be trumped by a massive force of Indian professionals who are creative, collaborative, entrepreneurial and life- long learners. 8. Crippling Sovereign Debt Almost everywhere countries, regional states and cities are in debt. Many thought prior to Davos that this would be one of the Forum’s biggest issues, but it wasn’t. Nevertheless, the increasing reliance on borrowed money to sustain government expenditures was referenced often. It’s easy to see why. The debt/GDP ratio for the Eurozone is a startling 85 percent, but the situation is worse in the US. The Congressional Budget Office estimates that the US debt/GDP ratio will continue to rise this decade and next, reaching 200 per cent around 2030. The highest debt to GDP ratio the US has experienced was 109 percent just after World War II. The deficit headache will get worse as baby boomers retire and social security pay-outs increase. But in the US, it’s not just the federal government that has problems. Of the 50 US states, 48 ran deficits in fiscal 2010. Federal stimulus funds to the states will run out 2012, so it’s possible that more than one state will default. So might a number of cities. Taken together, state and municipal debt is more than $2 trillion. It’s not clear to me how this global problem will be solved. The irresistible force to cut government spending is confronted with the immovable object of essential services, entitlements, military spending and extraordinary expenditures stemming from corporate bailouts and fiscal stimulation. Many Tea Party members just elected to Congress have vowed to cut government spending come hell or high water, despite warnings this may wreak havoc with the US and global economy. 9. Progress on New Models of Global Problem Solving The World Economic Forum is quickly morphing from a once-a-year talkathon into a year-round network of leaders and leading thinkers tackling global problems – from think tank to do tank. Nature hates a vacuum, and new networks are expanding to fill a void in our systems for global cooperation. The forum itself is an example, getting people acting constructively, in sharp contrast to the recent failures of other bodies such as the Doha Development Round of the World Trade Organization and the Cancun or Copenhagen Conferences on climate change. The world is organized around nation states based on national economies and that is unlikely to change in the foreseeable future. The idea of national sovereignty was initiated hundreds of years ago with the Treaty of Westphalia of 1648 and persists today. After the second world was there were many bold initiatives to create better systems of global cooperation, including Breton Woods, The United Nations, The General Agreement of Trades and Tariffs (GATT), the World Trade Organization and now the G8 and G20. But these international systems for cooperation are failing in achieving world goals of economic growth, climate protection, poverty eradication, conflict avoidance, human security and promotion of shared values. What’s needed is a Wikinomics approach — embracing more agile, networked structures enabled by global networks for new kinds of collaboration. Nation states would continue to play a central role but can overcome their silo thinking and behavior by sharing information more effectively, cooperating on real-time networks, and basing their decisions more deeply in the processes of multi-stakeholder networks. But how would this new, networked system of global cooperation work? There are many tough issues. How would these vast multi-stakeholder networks achieve legitimacy? How could they be held accountable? How would they interact with existing structures? How would participation be achieved? What should existing governments and other institutions do to embrace global networked cooperation and problem solving? 10. The Internet Does Change Everything, including Davos Understandably social media, mobility and the relentless digital revolution continues to drive change and cause concern in everything from intellectual property to youth revolutions. One striking indication is that Davos (really) embracing social media and consequentially opening up. The Forum wants to shake its elitist reputation and be seen as an open venue for global debate. But not everyone who wants to participate in the discussions can make their way to this small Swiss town. So Forum officials have arranged the next best thing: participating in Davos via social media. The newly established Social Media Corner was a hub of activity. Most of the major sessions were streamed live online and then posted on YouTube. WEF officials say that more than 42.000 people watched the sessions live, and the YouTube recordings were watched more than 60,000 times. Press conferences were also streamed live and viewers could submit questions to those in the press conference. “Ask a Leader” series put questions from the general public to participants. More than 120 participants uploaded a video response directly to the person who submitted the question via YouTube. The videos were viewed more than 20,000 times over the 5 days. Randi Zuckerberg from Facebook hosted Live Stream interviews with crowdsourced questions with participants ranging from Kumi Naido to Paulo Cheolo to John Kerry to Bono. More than 104,000 people watched the live interviews during the 5 days. More than 400 Davos participants were on the official Twitter list, including Presidents, Prime Ministers and top business leaders. The hash tags #WEF and #Davos were mentioned more than 65,000 times on Twitter. The Forum blog, featuring 50 guest posts from participants was read more than 21,000 times. The Forum is serious in wanting to be less elitist. This year’s social media innovations were a good start.

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AMERICAN SYSTEMS Promotes Roger Connell, Kevin Dodge, Paul Fields and Jon Valett to Vice President

February 8, 2011

Company Veterans Elevated to Lead Strategic Growth and Development of Their Respective Business Divisions

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Video: ARTOC’s Gabr Says Protests to Hurt Egypt Treasury, GDP

February 4, 2011

Feb. 4 (Bloomberg) — Shafik Gabr, chairman of ARTOC Group for Investment and Development, talks about the impact of protests in Egypt on the country’s economy and bond market. He speaks with Margaret Brennan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg)

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Katherine Warman Kern: What Comes First, Innovation or the Consumer?

February 3, 2011

In December 2010, the Department of Commerce published a greenpaper from the Internet Privacy Task Force for public comment. According to the press release issuing the greenpaper, the intent is “Protecting Consumer Privacy Online While Supporting Innovation.” But we all know how difficult it is to establish a framework to execute potentially conflicting objectives. And the green paper fails to overcome this challenge. In the Foreward (pp.iv.), General Counsel Cameron Kerry calls for a “Dynamic Policy Framework” to offer “a clear lens through which to assess current policy”. While policies need to be “dynamic” to leave room for future unanticipated consequences, the framework should be consistent and clear to give flexibility in execution but maintain fundamental integrity. Although the detailed discussion about execution is comprehensive and thoughtful, the leadership level communication is contradictory and confusing by failing to establish whether innovation or the consumer comes first. For example, there are contradictions in the goals set in Secretary Locke’s introductory letter and the Foreword from General Counsel Kerry. The paper begins with a letter from Secretary of Commerce, Gary Locke, in which he clearly states there is a problem from the consumer point of view, compelling a “fresh look”: New devices and applications allow the collection and use of personal information in ways that, at times, can be contrary to many consumers’ privacy expectations . Addressing these issues in a way that protects the tremendous economic and social value of the Internet without stifling innovation requires a fresh look at Internet policy (emphasis mine) . However, Cameron Kerry, General Counsel, asserts that the current model builds trust and protects consumers: The United States has developed a model that facilitates transparency, promotes cooperation, and strengthens multistakeholder governance that has allowed innovation to flourish while building trust and protecting a broad array of other rights and interests. As a result of the task force’s satisfactory assessment of the status quo, Kerry asserts that the goal of the task force is to maintain consumer trust: Privacy protections are crucial to maintaining the consumer trust that nurtures the Internet’s growth. And instead of taking a fresh look , the recommendation is to “reinvigorate” transparency: …the green paper recommends reinvigorating the commitment to providing consumers with effective transparency into data practices, and outlines a process for translating transparency into consumer choices through a voluntary, multistakeholder process. In other words, Kerry presumes that consumer trust is “good enough” when third parties are transparent about taking raw data without consumers’ express consent, interpreting it without consumers’ corroboration and participation , yet representing that interpretation as actionable and expected by consumers to Vendors, for commercial purposes. The assertion that consumer trust is satisfactory contradicts both Secretary Locke and the body of the greenpaper, which cites research revealing consumers of all ages do not trust these commercial uses of their information. Separately, despite the representation of consumer marketing companies in the list of inquiry respondents, there is little reference anywhere to the industry’s desired improvement in the effectiveness of internet marketing tools and media. How can the Commerce Department ignore that the fastest growing segment of the Internet is “custom digital publishing”? Marketing companies like Procter and Gamble are taking a detour around media companies to connect with consumers and are producing their own media properties to build relationships. This is specifically because marketing professionals realize that growing the business through short term promotions is not as effective nor as efficient as building long term relationships with consumers. Instead of advocating for the status quo and endorsing current practices through regulation and policy — as if this is the best business can do to both build consumer trust and promote innovation — the government should “disrupt ambiguity” with policies which encourage innovation that improves consumer trust, relationship building with commercial enterprises, and consequently the value of information to develop, market, and communicate with consumers. There are many initiatives working to achieve these objectives. For example, Project VRM , and the Personal Data Ecosystem . It is hard enough for entrepreneurs in these communities to raise investment dollars and educate consumers in today’s highly competitive market. We wonder why the government would endorse or sanction existing practices as “best” making it even more difficult for these initiatives to overcome hurdles for success? In the spirit of promoting innovation to improve consumer trust, here’s the opinion of one consultant and entrepreneur, Comradity , on the greenpaper’s recommendations. As background, the paper’s “Dynamic Privacy Framework” makes 4 recommendations: Fair Information Practice Principles (FIPPs) : “clearly articulated purposes for data collection, commitments to limit data uses to fulfill these purposes, and expanded use of robust audit systems to bolster accountability.” Privacy Policy Office in the Department of Commerce (PPO) : “work with the FTC in leading efforts to develop voluntary but enforceable codes of conduct. Companies would voluntarily adopt the appropriate code developed through this process. This commitment, however, would be enforceable by the Federal Trade Commission. Compliance with such a code would serve as a safe harbor for companies facing certain complaints about their privacy practices.” Encourage Global Interoperability: “build on accountability, mutual recognition and reciprocity, and enforcement cooperation principles pioneered in the Organisation for Economic Cooperation and Development (OECD) and Asia-Pacific Economic Cooperation (APEC).” Ensure Nationally Consistent Security Breach Rules : “Federal commercial data security breach notification (SBN) law that sets national standards, addresses how to reconcile inconsistent State laws, and authorizes enforcement by State authorities… The FTC and individual States should have authority to enforce this law.” Here are Comradity’s responses: The value of the FIPPs is directly related to whether the goal is to maintain consumer trust or improve it. For example, we believe that if the default were “opt-in” instead of “opt-out”, companies would be naturally inclined to be transparent and limit data uses to those that clearly and directly benefits the consumer in order to increase “opt in” rates. To avoid potentially deceptive or empty promises, we believe an independent multi-stakeholder agency review (e.g., the Privacy Impact Assessment (PIA) ratings) would assure audit systems are used to prevent drops in PIA ratings. To encourage new companies or existing companies who are innovative to make such a dramatic shift, why not give companies a free pass on regulations or favorable tax incentives when they make the default “opt-in” and volunteer for the PIA ratings? Why recommend adding the PPO, another representative to represent business interests? If there’s a need for a new government agency, shouldn’t it be a multi-stakeholder representative agency with representatives from Commerce, the FTC, the new Consumer protection agency, individual States Attorney Generals, the State Department, and others? If the objective of the Department of Commerce is to encourage global interoperability, why does it fail to acknowledge the existence of Privacy Commissions in Europe and Canada? In fact, another example of the contradictions between different sections of the greenpaper, in the body of the discussion about FIPPs, Privacy Impact Assessments (PIAs) are recommended, following the example of the European Commission: An industry standards organization pointed to the example of PIAs for radio frequency identification (RFID) tags, readers, and writers; 106 the European Commission recommended that EU Member States and RFID users develop a framework to assess the privacy risks (and safeguards) of using RFID applications. It’s expected that the Department of Commerce will advocate nationally consistent rules across all states, but instead of mandating state compliance, why not engage the states to participate in the collaborative process the Department of Commerce purports to be executing through the Internet Privacy Task Force? To see all the public’s responses to the Department of Commerce Internet Privacy Task Force Green Paper questions, the link is here .

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Jodie Allen: Who’s Really to Blame for the Housing Crisis?

January 31, 2011

The nominally bipartisan Financial Crisis Inquiry Commission released its findings last Thursday in tripartite form. One section, the output of the Democratic end of the panel, will focus on the Wall Street and banking sector abuses that contributed to the ongoing crisis. A second take on the troubles, the product of three centrist-leaning Republican panel members, focused on global influences. But the third, by the American Enterprise Institute’s Peter Wallison, repeated the now familiar GOP mantra that the entire blame falls on Democrats and their nurturing of Fannie Mae and its brother-in-housing-market-crime, Freddie Mac. No doubt Fannie and Freddie have plenty to answer for when it comes to squandering taxpayer dollars. But as New York Times columnist Joe Nocera pointed out last month, Wallison’s views on the two government-backed mortgage guarantors have undergone a strange sea change in the last few years. Back in the pre-crisis years of the Bush administration, Wallison would typically fault Fannie and Freddie not for liberal-leaning efforts to encourage home buying among the financially challenged, but for not doing enough to foster widespread home acquisition. A typical Wallison criticism in 2004: “”Study after study have shown that Fannie Mae and Freddie Mac, despite full-throated claims about trillion-dollar commitments and the like, have failed to lead the private market in assisting the development and financing of affordable housing.” Nor was Wallison, a lonely voice among his fellow conservative Republicans. Here, for example, is Stephen Moore, president of The Club for Growth, a preeminent supporter of supply-side tax cuts, writing on the subject in his 2004 book, Bullish on Bush . “Homeownership is at the heart of the American dream,” Moore wrote, while applauding “the decline in mortgage rates [that] has spurred a boom in refinancing that allowed many families to tap tens of thousands of dollars in equity, while in many cases still lowering their money payments.” Gee, and here I thought all that refinancing played a big role in creating the housing debacle! Quite the opposite, Moore assured us: “The result was an economic stimulus that has played a large part, along with Bush’s tax cuts, in fueling the rapid economic growth of the last two years. But the most important impact of lower mortgage rates is that more Americans are for the first time able to own their own homes.” Very touching. So maybe it wasn’t entirely the fault of those mushy-hearted Democrats after all? In fact, I seem to recall that both Moore and Wallison had far higher-level support for their home-ownership boosterism. Didn’t one George W. Bush, then the nation’s president, spend a fair amount of time on the hustings promoting his “Ownership Society”? Indeed, the very subtitle of Moore’s book asserts that this same Bush plan “will make America stronger.” Well, let’s let the president speak for himself. Here he is at a 2003 dinner in the Wings Over the Rockies Air and Space Museum: “This administration will constantly strive to promote and ownership society in America. We want more people to own their homes. I’m troubled by the fact we have a minority home ownership gap in America…” None of this is to say that measures aren’t needed to restrain the public as well as the private financial sectors. But it might be somewhat easier to enact sensible reforms if the fingers of blame were pointed in a more equitable direction.

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Rep. Brad Miller: Republican Amnesia on the Financial Crisis

January 31, 2011

Sometimes party loyalty asks too much, even among today’s rigidly unforgiving Republicans. In December, the four Republicans on the Financial Crisis Inquiry Commission (FCIC) appeared to accept the Republican agitprop explanation, or “narrative,” of the financial crisis: government regulators, under pressure from liberal Democrats like Barney Frank and Maxine Waters, bullied banks into making foolish, “politically correct” loans so poor folks could buy homes that they couldn’t afford. But when the FCIC issued its final report last week, three of the four Republican commissioners flinched, apparently unwilling to sacrifice forever their scholarly reputations to the cause of partisan hackery. Instead, the three Republican commissioners argued that the financial crisis was caused by a combination of dimly understood macroeconomic forces, an unforeseeable “perfect storm.” Was this crisis preventable? ” We don’t know ,” said Republican FCIC commissioner Keith Hennessy. That argument has also been justly mocked by economics bloggers as “hoocoodanode?” (“Who could have known?”), but is far less laughable. Only one commissioner, Peter Wallison, stuck with the Republican agitprop narrative. Republican politicians with little scholarly reputation to protect are undeterred , of course, by the defection of three of the four Republican FCIC commissioners or by the repeated demolition of the narrative by economists. But here’s a question Republicans in Congress don’t want to hear: why haven’t they reminded us that they warned before the financial crisis that subprime mortgages would come to grief? And why haven’t banks, happily exculpated by the narrative, reminded us that they warned at the time that they were being forced to make foolish loans that would endanger their solvency? The answer is simple: the Republican narrative was created from scratch after the financial crisis. During the height of subprime lending, the lending industry, conservative commentators and Republican politicians celebrated subprime mortgages as the triumph of the innovation that comes from unfettered capitalism. Subprime mortgages, they said, made homeownership possible for millions of American families who could never own their own home under the dreary, stultifying rules that Democrats like me proposed. Robert Crouch testified at a congressional hearing on behalf of the Mortgage Bankers Association on November 5, 2003. Crouch said that “through innovations in the mortgage finance industry, and through various financing and risk enhancing tools created for the specific purpose of extending credit to our more needy communities, credit-impaired individuals now have ample opportunity to obtain loans through this ‘non-prime,’ or ‘sub-prime’ market.” The growth of the subprime market, Crouch said, “disproportionately benefited low-income and minority borrowers, as these groups are much more likely to rely on subprime credit. One clear and visible outcome has been an increase in homeownership rates for low-income and minority borrowers.” William M. Dana testified at a congressional hearing on March 30, 2004, on behalf of the American Bankers Association. Dana said that “the ABA believes that the development of the subprime market has been a positive development for American consumers.” Market innovation “has made credit available to many consumers who had previously been left out of the marketplace,” he said. “The development of the subprime market has assisted those borrowers tremendously.” What Republican politicians said was so similar it was almost like bank lobbyists wrote their remarks for them. “I need not remind my colleagues on the committee that Americans currently enjoy the highest rate of homeownership in the history of America,” Congressman Jeb Hensarling said at a congressional hearing on May 24, 2005. “The benefits of free enterprise and competition have been plentiful. With the advent of subprime lending, countless families have now had their first opportunity to buy a home or perhaps be given a second chance. The American dream should never be limited to the well-off or those consumers fortunate enough to have access to prime rate loans.” Nor was there a discouraging word about subprime mortgages from conservative commentators. The Republican narrative puts much of the blame for the financial crisis on the Community Reinvestment Act (“CRA”), a 1977 civil rights law aimed at “redlining.” At the time, banks literally drew red lines on city maps around neighborhoods in which they would not lend. But in 2000, the conservative CATO Institute published an article that said “CRA” should stand for “Community Redundancy Act.” The article argued that “progress predicated on technology, financial innovation, and competition — not CRA — has broadened the U.S. financial marketplace,” including lending in neighborhoods that had once been redlined. If a lender discriminated against a low-income neighborhood, “the profit motive would lead another lender to move in and fill the void.” It’s true that Republicans were critical of Fannie Mae and Freddie Mac, the principle culprits in the Republican agitprop narrative. But Republicans’ criticism was that Fannie and Freddie weren’t buying enough mortgages for riskier, low-income borrowers. Fannie and Freddie were shareholder owned corporations run for a profit, but they began as government agencies that bought mortgages from banks so banks could lend more money and more families could buy homes. Both were “privatized” in the sixties, and both did very well by doing good. In 2001, Fannie was 13 and Freddie was 18 on Fortune Magazine’s list of the most profitable corporations. But by the nineties, Fannie and Freddie did not have the business of buying mortgages to themselves. Others in the industry were also buying mortgages and selling mortgage-backed securities, also quite profitably. The competition was bitter. Fannie’s and Freddie’s competitors argued that despite the subsidy from the government’s implicit guarantee, Fannie and Freddie were neglecting affordable housing for low-income Americans for the sake of profits. Fannie’s and Freddie’s competitors urged that Fannie’s and Freddie’s business be largely limited to affordable housing for low-income borrowers. Republican criticism of Fannie and Freddie was part of an internecine battle in the financial industry between Fannie and Freddie on one side, and their competitors, companies like AIG and Lehman Brothers, on the other. Fannie’s and Freddie’s competitors — and their Republican allies — argued that Fannie and Freddie had an “implicit guarantee” from the federal government that amounted to an unfair subsidy. Peter Wallison (yes, same guy) wrote an article in the American Banker on March 3, 2006 opposing an increase in the “conforming loan” limit that was typical of the criticism of Fannie and Freddie at the time. Fannie and Freddie were already “doing less than conventional lenders in helping the underserved,” Wallison said. Fannie and Freddie “only provided about 4% of credit going to minority borrowers.” Rather than compete with other lenders for profitable mortgages for upper-income borrowers, “Fannie and Freddie should do a much better job of providing affordable home financing to a neglected portion of the mortgage market.” If political bullying is to blame for Fannie’s and Freddie’s conduct, Republicans were at least equally guilty. The financial crisis occurred seven years and eight months into a Republican administration that let the financial industry write its own rules. A narrative of the financial crisis that absolves Republicans and the financial industry requires an acrobatic and brazen imagination. Believing the narrative requires willful amnesia.

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Video: ElBaradei, Annan, Obama’s Own Words on Egyptian Protests

January 28, 2011

Jan. 28 (Bloomberg) — President Barack Obama, former U.S. president Bill Clinton and Egyptian government opponent Mohamed ElBaradei talk about the clashes on the streets of Cairo demanding the end of President Hosni Mubarak’s regime. This report also includes comment from former United Nations Secretary General Kofi Annan, Organization of Economic Cooperation and Development Secretary General Angel Gurria, International Monetary Fund Middle East Adviser Masood Ahmed and Bahraini banker Khalid Abdulla-Janahi. This report contains some video provided by APTN.

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Les McKeown: Stop Trying to Find Your Passion and Get to Work

January 24, 2011

Let’s get something straight: passion is not a requirement for business success, and the seemingly 24/7 ‘passion-in-business’ industry is selling you a pup. Despite the ever-multiplying “find-your-passion” gurus and the breathless profiles of passionate leaders by never-ran-a-business-in-their-life journos, possessing passion is about as relevant to business success as possessing Steve Job’s black turtleneck: try hard enough and you can get your hands on either (or both), but neither will guarantee you business success. There are two significant ways in which this fixation on passion as a prerequisite for success in business is seriously damaging: it deludes new and potential entrepreneurs into believing that if only they can find their ‘true north’, then their business venture will surely succeed; and it is hijacking (or at least hobbling) the development of serious leaders with genuine depth. Here’s the problem with selling passion as a fundamental of business success: 1. It’s largely a fiction : Sure, there are a cluster of usual suspects who get rolled out in every ‘passionate leader’ discussion: the aforementioned Steve Jobs, Richard Branson, Tony Hseih and (insert your personal favorite here). There are any number of problems with this roster, but let’s focus on just three: First, every one of these people are successful because they’re brilliantly competent, not because they’re passionate. Second, most of these folks, brilliant as they are, know how to mix great PR and communication skills with a laser-like focus on a world-class strategy, which is a complex and nuanced skill. Reducing it to ‘passion’ demeans them and their accomplishments. Third, for every poster child for passion, there are literally hundreds, if not thousands of counter-examples — business leaders that only you or I or their employees or their immediate family have heard of, because they’re just quietly getting on with being successful. If we all had to be like Tony Hsieh to succeed, the economy would be screwed. 2. It gets in the way : Have you ever actually worked with somebody who is driven, night and day, by raw passion? It’s tiresome in the extreme and highly ineffective. It makes everything a drama, posits challenges where there need only be action, and disrupts needed rhythm and focus from the daily routine that ninety percent of business tasks are composed of. Don’t get me wrong. I love meeting ‘permanently passionate’ people. I even enjoy the odd cup of decaf coffee with them. Maybe even lunch (maybe – so long as it’s two courses, max). After that, I want to get back to the real world, where the rest of us live. 3. It doesn’t do the job : There are times when passion is an important part of a leaders job, but those times are limited. If I attended spin class (which I don’t) I’d want my spin class leader to be passionate, but for one reason only — that’s part of the deliverable. Don’t get me up on my toes and this thing isn’t going to happen. But my muffler replacement guy? No thanks. I just want him to be competent. And my top sales person. And my GP. And my VP Accounting. And my CEO. I want competence over passion, any day. When you’re 24-3 down in the playoffs, it may be great to see your team barreling into the next huddle like viking invaders with their hair on fire, but it only means something when they step up and competently execute a 14-play drive that ends in a touchdown. Soaring oratory in a difficult time can help raise morale, but it actually means something only if you have an effective strategy and world-class execution to back it up. And in both cases I know which one – passion or competence – is optional. The passion-driven leader may be pretty to watch, but selling people on the concept that passion means everything for business success? No thanks. I’ll take competence — even mercenary competence – every time.

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April Rudin: Impact Investing — Using Green Thinking to Make Green Dollars

January 24, 2011

Impact, socially responsible or sustainable investing has slowly crept onto the investment scene as an alternative asset class. But it has gained attention, in part, to mitigate the bad karma created by Madoff and others, non-transparency of investments, the recession, low interest rates, a depressed economy, and high unemployment. Socially responsible investing is the feel-good asset class. It’s the intersection of banking, philanthropy and Wall Street. Investors are shunning ‘get rich’ firms who are ruining our planet. Upcoming Gen-X and Gen-Y investors and their dollars want to make a difference. It will therefore be a growing social community of like-minded investors. Simultaneously, increasing numbers of high net-worth individuals, wealth managers, institutional and other investors want to “doing good while doing well.” These individuals are of the baby-boomer generation. Some have been late adopters and doubted the “depth” of this movement but clearly there is groundswell among those who want to generate return either partially or even wholly through funds or direct investments. This has led to the creation of boutique Wall St. firms which zero in on this specialization and larger financial institutions have creating small teams to focus on locating, understanding and vetting investment opportunities. As it is early, there is still conversation over whether or not impact investing is indeed an asset class or an underlying strategy which will be eventually used in all products. Once the playground of the wealthy, or for the class of investors who could tolerate lower returns, sustainability-specialized investments are becoming available to investors of all amounts and with excellent returns. Formerly, the underlying psychology for sustainable investing ranged from some investors whose expectations are to outperform the market, to others who have a willingness to sacrifice performance for effective social impact. Today, there are products and places for investors of all sizes, goals and risk tolerances. There are boutique Wall St. firms which zero in on this specialization and larger financial institutions have created small teams to laser focus on locating and vetting investment opportunities. Much has changed since the landmark 1987 UN-backed World Commission on Environment and Development, which put forth the notion that ” the needs of the present (must be recognized) without compromising the ability of future generations to meet their own needs .” Areas of specialization within sustainable investing today include: investment areas such as adverse demography, climate change, resource depletion, global economics, and much, much more. There are direct opportunities to invest in an idea and/or funds which invest in multiple ideas and strategies. Institutional investors ( primarily pension funds) have always taken a long-term investing approach and are now trying to integrate environmental, social and governance goals ( ESG ) with their longstanding inter-generational bias. ESG is a “best practice” for any size investor. Today’s institutional investment SWAT teams are exploring how credit markets, banking and investment management can line-up together on the socially responsible playing field. Outside of institutions, early adopters in impact investing have been family offices, high net worth individuals and their entities, private banks, etc. This is a hybrid investor class that is small in size, but powerful in investable dollars. In the future, powerful investment communities will be formed by uniting like-minded investors who will deploy funds readily when the parameters meet both their performance and sustainability goals. Multi-family offices or families with substantial wealth are able to influence markets through passionate investing. They function as the “trusted advisor” across financial, philanthropic and succession planning. As with any new emerging idea, ROI benchmarks for measuring the social impact separate from dollar returns has not been met with any universally adopted formula. Qualitative analysis between metrics and results are not clear. For the time being, the feel-good “kumbaya” message is sufficient return along with some profits. Return is measured in other ways including investors who invest alongside their children and grandchildren. They choose to “measure” the benefits of modeling socially-responsible investing behaviors to family members. This, of course, is priceless. I have written before, it’s not easy being green. And we all know that it is not easy “making green.” But in the future it will be. There are even courses taught at major universities in prestigious business school where the integration of public policy, philanthropic goals and passions can come together for the good of Wall Street and every street. Our future thought leaders are sitting in those classrooms and dreaming of what the interface might look like.

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William Meers: Is Swiss Banking Still the Way to Go for Private Banking?

January 23, 2011

The complex financial world of Swiss Banking is far too extensive to examine in a brief article such as this one, however it is possible to introduce a few ideas, and render a few misconceptions regarding this misunderstood world redundant. The mere mention of the words ‘Swiss Banking’ often conjures images of James Bond, and Bond Villains, luxurious lifestyles and mafia bosses stepping off private yachts with suitcases full of pristine condition 100 bills ready to be left in an anonymous account with a lengthy number. If this is what springs to mind your vision of Swiss Banking is far removed and detached entirely from reality as, contrary to what Hollywood may tell you, Swiss Banking and the entire world of offshore banking is not a haven for the rich and it is not a place to take your criminal activity. To fully explain what the world of Swiss Banking entails it is necessary to understand certain concepts such as ‘offshore banking’, ‘offshore bank account’, ‘tax haven’ and more relevant terms such as OFC and IFC. I will begin this brief overview by explaining these concepts in the simplest possible way before offering a brief, but balanced, view as to what Swiss Banking actually is, and how it works. Concepts such as offshore bank accounts are often, unreasonably, associated with criminal activity and tax evasion — and tax havens as being the location where this activity takes place and is facilitated. This is an oversimplified gross misrepresentation of the truth in which the offshore banking world actually takes its place as fully integrated in the global economy. An offshore bank account is simply a bank account which is based in a different jurisdiction to where you, as an individual or entity, legally reside. No more — no less. A tax haven is simply a location which has lower tax rates for foreign investors than would be available in their domestic jurisdiction — and entices investment overseas. These definitions are oversimplified for the purpose of facilitating understanding, but to illustrate how complex the issue is, the OECD (Organization for Economic Cooperation and Development) has not been able to produce a definition as to what a tax haven actually is. The idea behind them is that by offering zero or low tax to foreign investors, they can encourage investment from a foreign jurisdiction, which obviously has implications for another country. It may surprise you to learn that every country does this — the USA for example offers several capital gains and investment tax relief benefits that, by traditional definitions, makes it the world’s largest tax haven. The entire concept of a tax haven is, however, over-simplistic and implies that tax evasion or avoidance is the only reason to move investment money to an alternative jurisdiction. Again this is a gross misrepresentation of the reality where there are a number of benefits and investment specialists who work to make an individual or corporation’s investment work for them. The terms OFC (Offshore Financial Center) and IFC (International Financial Center) are becoming more popular and are, perhaps, a more appropriate label for a complex and diverse series of financial services. Why then, would one open an account with a Swiss Bank? The answer depends on one’s individual or corporate circumstances. Swiss Banking offers a wide range of services, but as a rule those who benefit will be on the wealthier side of society, but this is not limited to individuals. Nearly all multinational companies have offices, and are often focused in areas generally considered ‘tax havens’. There is no minimum limit, but as services are often fee and commission based and structures such as trusts require set up and maintenance fees, an individual being required to be worth over U$1 million is common. Businesses are usually only worth moving offshore if profits of U$100,000 are being made annually, while opening an offshore bank account is usually not worthwhile for less than U$100,000. However, for these, not inconsiderable, sums of money there are certain benefits such as tax benefits due to PTRs (Preferential Tax Regimes) in certain cases and in the case of Switzerland if you become a legalized resident. However Ta x Benefits are not the only benefit, and entering the world of Swiss Banking opens you to a world of specialist advisors in the world of asset protection and investment advice. Such advisors dedicate themselves to protecting and helping you to take full advantage of your money — and is generally a fee or commission based service. Swiss financial institutions are famous for their professionalism and loyalty and uphold one of the most unique financial characteristics of Swiss Banking — ‘Banking Secrecy’. The concept of Banking Secrecy originally developed from the 1934 Swiss Bank act and offers a legal support for your financial data and offers you a certain degree of discretion and peace of mind. This leads us to the first paragraph of this article — the image of Swiss Banking. If there is intent of criminal activity, this anonymity is NOT designed to protect those interests. Swiss institutions follow a strict KYC (Know Your Customer) protocol which is used to determine legitimate sources of all funds being invested. If one’s interests are motivated by illegal tax evasion, Swiss banking is not the place for you — you are far more likely to be reported by the Swiss institution involved than be found by your own jurisdiction.

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Chinese President Hu Jintao In Chicago: Visit Focuses On Business

January 21, 2011

CHICAGO — Mayor Richard Daley’s long effort to build ties with the world’s second-largest economy seemed to pay off Thursday as Chinese President Hu Jintao made his first visit to Chicago, his only stop outside Washington during this trip. Hu was expected to focus on economic ties between China and Chicago during his whirlwind overnight visit to the city. Experts said the attention from China has been the envy of other U.S. cities and could mark a gigantic – and profitable – step forward for both parties, despite the sometimes rocky U.S.-China relationship. Many credited Daley’s efforts. The mayor has traveled to China four times since 2004, touting Chicago as a global transportation hub with large manufacturing and industrial sectors friendly to Chinese business. “Chicago deserves some kudos. It’s clear that he’s (Daley) cultivated the China relationship and he’s learned how to do that very well,” said Kenneth Lieberthal, director of the John L. Thornton China Center at the Brookings Institution. “Mayors and governors around the country, regardless of their politics, see China as a source of potential capital, markets and jobs. So you better be ones looking to have the president of China come here.” Hu planned to attend a Thursday dinner with Daley, Gov. Pat Quinn and business leaders. On Friday, he was expected to visit a unique Chinese language institute Daley helped develop and a Chinese business expo in the suburbs. Daley characterized the visit as a “big, big, big, big, big deal,” at a news conference last week. The retiring Democratic mayor has focused on business and largely stayed away from politics in developing a relationship with China. He went to Shanghai last year to headline “Chicago Days” at the 2010 World Expo. In 2008, he went to the Beijing Olympics to look for lessons for Chicago’s 2016 Summer Olympics bid. He has avoided criticizing China for human rights issues and stayed away U.S. manufacturers’ claims that China undervalues its currency to make its exports cheaper than U.S. products, contributing to high unemployment here. In 2006, Daley pushed for the development of the Confucius Institute in Chicago, a language and cultural center that started as a small parent-driven Chinese language program. It’s now one of the largest institutes of its kind in North America; about 12,000 Chicago public school students take Chinese and the institute offers community classes and international exchanges for teachers. While the institute doesn’t have direct ties to business, leaders in Chicago’s Chinatown say it helps forge a connection. “It creates a whole generation of younger students and future leaders to understand Chinese culture and language. It will help the business transaction,” said Tony Shu, president of the Chinatown Chamber of Commerce. “If you know the language, you’ll find it so much easier.” City leaders say Chicago’s sister cities program also has helped. Shanghai and Shenyang have been Chicago sister cities since 1985, and Daley has met mayors of both cities. He met Hu at a White House state dinner in 2006, a Daley spokeswoman said. Tom Bartkoski, a director at World Business Chicago, also said Daley deserves much of the credit for the growing economic ties between China and Chicago. Chicago-area businesses such as Boeing, Motorola, Abbott and Wrigley have expanded operations in China. On Wednesday, Obama announced new business deals with China worth $45 million, including a highly sought $19 billion deal for 200 Boeing airplanes. At least 40 Chinese businesses now have operations in the Chicago area, and the number is growing. For example, Wanxiang America Corp., which makes solar panels, has opened plants and a headquarters around Chicago in the last two years. While Daley deserves much credit for Hu’s visit, some experts say it also was a natural progression. Hu visited much of the West Coast in 2006, with stops in Los Angeles and Seattle. There’s also been some precedent for Chinese presidents to see the U.S. president’s hometown. In 2002, former President Jiang Zemin went to former President George W. Bush’s Crawford, Texas, ranch. Others see the Chicago visit as a bit of a surprise since the Chicago area hardly has the largest Chinese population in the U.S. Roughly 1 percent of the metro area’s approximately 9.6 million people are of Chinese descent, according to the U.S. census. Six other metro areas – New York, Los Angeles, San Francisco, San Jose, Calif., Honolulu and Boston – have larger Chinese populations. Aside from business, Hu’s visit was expected to help increase awareness of Chicago and tourism. “It gives us much greater visibility in China. They remember cultural icons,” said Dali Yang, a political scientist and faculty director at the University of Chicago Center in Beijing. “We are at a critical turning point. This is to establish the image of Chicago as that destination in their consciousness.” Daley, who was in Washington for a mayor’s conference, declined interview requests before Hu’s visit. An election for his replacement is Feb. 22. Candidates include former White House chief of staff Rahm Emanuel and former U.S. Sen. Carol Moseley Braun.

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Controversial Outsourcing In Construction Of Boeing’s Much-Hyped Dreamliner

January 20, 2011

EVERETT, Washington (By Kyle Peterson) – On a blustery and drizzly December afternoon in the Pacific Northwest, about 20 airplanes sat engineless and inert near the runway at a Boeing manufacturing plant. Huge, yellow blocks hung from the wings of some planes to substitute for the weight of absent engines. Every few minutes, the heavy clouds parted to give a glimpse of blue skies over Everett, Washington, just north of Seattle. Then new clouds rolled in. The parked planes are 787-8 Dreamliners, the world’s first commercial aircraft with a body and wings made largely of lightweight carbon-composite materials instead of aluminum. Someday these sleek, fuel-efficient machines — already painted in the liveries of their airline customers — may change the face of air travel and plane-making. But not today. The program that produced these unfinished 787s is nearly three years behind schedule and, by some estimates, at least several billion dollars over budget. Dreamliner flight tests were halted in November after an electrical fire aboard a test plane. The tests resumed in December, and the company later announced yet another delay for the delivery schedule. The new ETA is sometime this summer. About 45 miles away in south Seattle, members of Boeing’s work force gathered at a union hall for a monthly lodge meeting, a holiday party and a chance to lament the seismic shift in plane-making strategy they say the Dreamliner represents. The 787 is not merely a historic feat of engineering. The program also marks Boeing’s departure from its own time-honored manufacturing practices. Instead of drawing primarily from its traditional pool of aircraft engineers, mechanics and laborers that runs generations deep in the Puget Sound region around Seattle, Boeing leads an international team of suppliers and engineers from the United States, Japan, Italy, Australia, France and elsewhere, who make components that Boeing workers in the United States put together. “Do you see the stupidity in that?” said James Williams, an imposing 43-year-old who has been employed by Boeing for 15 years, mostly working in factory safety. Williams, whose father worked at Boeing for more than three decades, is just one of many in the company who blame the repeated Dreamliner delays on a splintered engineering strategy and a complex supply chain of about 50 partners. Boeing itself has acknowledged that the system needs tweaking, and the company promises to bring more of the design work back in-house for the upcoming 787-9 model. But Boeing defends its reliance on outside partners, saying their work and investments made the Dreamliner possible. “It is true that supplier involvement in the development and design of the 787 is significant,” the company said in an emailed response to Reuters questions. “Suppliers helped us develop and understand technologies and options for the airplane as we went through the early phases of concept development. Suppliers have also provided more of their own development, design and manufacturing funding.” Whatever the advantages, Boeing’s outsourcing is emblematic of corporate practices that have sent large chunks of U.S. industry overseas and to other states, battered communities and vaulted the U.S. jobless rate to nearly 10 percent, economists say. Yet the biggest victim may be the culture that underpins the aerospace behemoth. Here in Boeing country, where children follow parents into the aviation business, outsourcing is plain heresy. “It was like the family,” said Williams, whose wife, Sarah, and three children joined him for the holiday party. “Can you outsource Mom? Can you outsource Dad?” SHRINKING WORKFORCES Boeing is the world’s second-largest commercial plane-maker after its European rival Airbus. Founded in 1916 in Seattle by William Boeing, the company earned $68.3 billion in revenue in 2009, split between its defense and commercial airplanes divisions. The U.S. Chamber of Commerce says the aerospace industry achieved $215 billion in sales in 2009 and provided more than 644,000 jobs. According to data compiled by consulting firm Challenger, Gray & Christmas, Boeing is the 24th largest U.S. employer, including private companies and government. It is the fourth-largest employer in the U.S. manufacturing sector, excluding wholesalers, distributors and construction companies. All told, Boeing and its subsidiaries employ 160,000 people in the United States and abroad, including 73,000 people in Washington. But while the company remains a pillar of the local economy and is hiring right now in Washington, Boeing is not the engine of job growth it once was. At the time of the September 11, 2001 attacks on New York and Washington D.C., Boeing’s total workforce was about 199,000. Its defense and commercial units shed 20,000 jobs between January 2002 and January 2003 after the 9/11 attacks sparked a steep decline in air travel and aircraft orders. Myriad other U.S. manufacturers also cut jobs during that economic downturn, and many of those never regained their former staffing levels. “What you’ve seen is a continual decline in manufacturing employment that didn’t just start 20 years ago,” said Stephen Bronars, senior economist at Welch Consulting. “And it’s accentuated during downturns, where you see the steepest decline in manufacturing employment when there’s a recession.” At its numerical peak, in 1978, the U.S. manufacturing sector accounted for more than one out of every four U.S. jobs, according to government data. Back in the 1950s, manufacturing made up an even higher share — more than a third — of total employment. “A lot of Western Europe was still reeling after World War Two, and so we didn’t have the same kind of competition when it came to manufacturing in the ’50s,” Bronars said. Since the 1970s, employment in manufacturing has fallen more than 30 percent in the United States, compared with about 60 percent in Britain, and about 20 percent in Japan. Then came the 2008/2009 global economic downturn, which wiped out nearly 8 million U.S. jobs. About 2 million of those were in manufacturing. Economists believe that many of these positions are gone for good, forcing blue-collar workers to search for employment elsewhere — often at lower wages. In several ways, Boeing’s replacement of in-house labor with outside partners is typical of this trend. Although some of its outsourcing is to other U.S. companies and some of its job reductions came from spinning off businesses, the net effect has been punishing for Boeing’s Washington workforce. From Boeing’s perspective, change was inevitable. Its role as a truly international company — with 80 percent of its commercial airplane backlog for international customers — demands a diverse and global operation to blunt the shocks to the U.S. job market from the highly cyclical aerospace business. “Clearly, Boeing is a global company with a global customer base, and our U.S. employees benefit from that,” the company said in an email response to questions by a Reuters reporter. “U.S. jobs are created by selling airplanes around the world.” NOT SO SIMPLE That is true as far as it goes, but building airplanes is far more complicated than other frequently outsourced jobs like, say, textile manufacturing. Plane-making is best done by a group of engineers and builders working in close proximity without the distractions of language barriers, cultural differences and bureaucracy, said Tom McCarty, president of the Society of Professional Engineering Employees in Aerospace (SPEEA) local representing Boeing engineers in the Puget Sound region. “Now with the 787, management felt they knew how to outsource the design jobs. Turns out they didn’t,” he said. “We’re talking about how do you design and manufacture a plane like the 787?” McCarty said. “It’s a very unique skill set. And schools don’t turn out people who know how to do that. And there is a culture that has developed the composite knowledge of all those skills. We know how to build all these planes.” To be sure, language barriers and borders have not prevented Airbus from overtaking Boeing as the world’s largest aircraft manufacturer in the past decade. Driven by history and political necessity, the 40-year-old plane-maker was forced from the outset to create a system in which planes are built from large sections made in four countries — Britain, France, Germany and Spain — and then assembled in France or Germany. Airbus has also begun assembling smaller A320 150-seat planes in China for the local market. The difference with the 787 and its future Airbus rival, the A350, is that both manufacturers are being forced to ship an increasing quantity of work for these planes beyond their traditional borders to share the risk and costs of giant technological changes aimed at making planes lighter to save fuel. Still, Airbus has been more conservative on outsourcing. It contracts 52 percent of the airframe to outside suppliers. Boeing says it purchased 65 percent of the 787 airframe, which is comparable to the 777. Because the A350 will not be available before 2013 — a result of previous dithering over product strategy, according to its critics — the EADS subsidiary can also afford to sit back and learn from Boeing’s perceived mistakes on the 787. McCarty said that by relying so heavily on foreign partners for their engineering, Boeing devalues the so-called tribal knowledge that facilitates practical application of complicated, academic engineering concepts that eventually produce a new plane. Acquired on the job and over time, tribal knowledge is a key ingredient in the development of a new plane, some experts say. It is the shared method of performing countless daily tasks efficiently and in coordination with colleagues. In short, tribal knowledge is the grease that cuts friction throughout the design and assembly process. “One of the things you don’t want to outsource is your core competencies,” said Karen Kurek, national leader of the manufacturing practice at RSM McGladrey, a tax and consulting firm. “It’s the thing that gives your organization your value added.” McCarty says the loss of tribal knowledge could have far-reaching consequences for American engineering. “As we outsource part of this work, we’re removing opportunities for learning this trade, for learning these skills,” he said. “As we reduce these opportunities to learn how to do these jobs, the Boeing Company becomes less capable to do the job.” THE PIVOTAL MOMENT Many aviation experts say Boeing began to put a lower premium on in-house labor after its 1997 merger with rival McDonnell Douglas. That was the same year Boeing posted its first full-year loss as Airbus stole market share. Boeing’s $16.3 billion purchase of McDonnell Douglas triggered the integration of management at the two companies with Boeing Chief Executive Phil Condit, a former aerodynamics engineer, retaining the top job. McDonnell Douglas CEO Harry Stonecipher, formerly of General Motors, GE and Sundstrand, became president of the merged aerospace giant. After a brief retirement, Stonecipher later returned to Boeing as CEO. In September 1998, Alan Mulally, who started his career as a Boeing engineer, was made head of the Boeing Commercial Airplanes (BCA) division. Some critics view the merger as the point at which BCA began to favor a corporate culture that prized near-term profits over long-term engineering dominance. “Back in the early 2000s there was effectively a battle for Boeing’s soul,” said Richard Aboulafia, vice president at aviation consultancy Teal Group. He and others also single out Stonecipher as the face of Boeing’s shifting priorities. “He was symptomatic of the McDonnell Douglas philosophy,” Aboulafia said. Around this time, Boeing moved its corporate headquarters to Chicago after 85 years in Seattle. Labor unions complain the departure drove a wedge between executives and Seattle-area rank-and-file. But the global corporation cited a need to be near Wall Street, Washington D.C. and big customers. BCA headquarters remained in Seattle, its attention fixed on the next big project. “There were the legacy commercial guys who once a decade invested very heavily in the company’s future by creating a new jet. And then there were the newcomers,” Aboulafia said. “Effectively, it was dominated by a lot of the McDonnell Douglas people who were a little more concerned with shareholder relations and perhaps even their own wealth,” he added. “And they absolutely did not want to make a big investment.” Boeing’s previous initiative, the 777, had recently entered service, and it was time for Boeing to get to work on its next new model. Responding to airline demands for greater fuel efficiency, Boeing began developing the design that in 2003 would be dubbed Dreamliner. The carbon-composite structure would be lighter than aluminum planes of comparable size and would consume 20 percent less fuel. The concept was incredibly popular among cash-strapped airlines that were still reeling from a drop in travel demand after 9/11. But when it came time to build the 787, Boeing turned away from its stable of engineers and mechanics to embrace a complex web of suppliers. For the first time in its history, Boeing would outsource the wing design and manufacturing. “That, I think the smart people there knew, was an incredibly risky way of doing it, but it was the only way they could move forward,” Aboulafia said. “It was kind of a Faustian bargain, I think, that Alan Mulally made. He did what he had to do to launch the program given the tremendous adversity he was facing.” For its part, Boeing maintains that it never abandoned its standards for design and engineering. “Boeing leads the design effort, oversees the processes and tools, and holds both ourselves and our partners to the highest standards of performance on safety and quality,” the company said. “It is important for Boeing to retain critical skills for engineering and building structures such as wings and composite structures,” Boeing said. The company had planned to make a first test flight of the Dreamliner around late August 2007 and first delivery in May 2008. But that target began to slip in 2007 when Boeing postponed the first test flight due to a shortage of bolts and flight control software. More delays followed as production problems mounted. In 2008, the company blamed another delay on a 58-day strike by Boeing assembly workers over contract terms. The next year, Boeing bought portions of business units of two of its suppliers to help regain control of its Dreamliner production. It paid $580 million for the South Carolina operations of Vought Aircraft Industries, the company that worked on the 787 aft fuselage section. Boeing later purchased Alenia North America’s half of Global Aeronautica LLC, the South Carolina fuselage subassembly facility for the 787. Boeing did not disclose financial terms of that deal. “By taking Alenia out of the ownership equation, this tidies up the situation in Charleston,” Boeing said in a statement at the time. The Dreamliner finally made its first flight on December 15, 2009. But less than a year later the company postponed delivery again — this time to early 2011 — because of a delay in the availability of a Rolls-Royce engine needed for the final phases of flight testing. In October 2010, Boeing said it would tell suppliers to halt deliveries of sections for its 787 Dreamliner for two weeks because of delays at Alenia, a unit of Italian defense and aerospace company Finmeccanica SpA. Alenia makes the horizontal stabilizer for the tail of the 787. On November 9, the Dreamliner schedule endured a new hiccup when a fire on a 787 test flight forced an emergency landing in Laredo, Texas. Boeing halted the test flight program to determine the cause of the fire, which it later attributed to foreign debris in an electrical equipment cabinet. The company resumed 787 flight tests in late December, saying it had installed an interim version of updated power distribution system software and conducted a rigorous set of reviews. The electrical system and a power panel for the 787 are built by the Hamilton Sundstrand unit of United Technologies Corp, a major Boeing supplier responsible for several key components of the 787′s electrical systems. On November 30, Jim Albaugh, who took over as BCA chief in 2009, confirmed to Reuters that Boeing would delay delivery to its 787 launch customer All Nippon Airways. Then, earlier this week, Boeing announced that it had moved first delivery to the third quarter of 2011 from the first quarter. That at least had the effect of assuaging Wall Street concerns about an even longer delay. CONTRITION AND DAMAGE CONTROL Nowadays, Boeing is quick to acknowledge the rocky road the Dreamliner has traveled so far. In a speech to the Wings Club of New York on November 11 — just two days after the electrical fire that grounded the 787 test fleet — Boeing CEO Jim McNerney appeared chastened. “In retrospect, our 787 game plan may have been overly ambitious, incorporating too many firsts all at once — in the application of new technologies, in revolutionary design-and-build processes, and in increased global sourcing of engineering and manufacturing content,” he said. But he also reiterated the company’s faith in the Dreamliner. “While we clearly stumbled on the execution, we remain steadfastly confident in the innovative achievements of the airplane and the benefits it will bring to our customers,” he said Boeing executives declined to be interviewed for this story, but the company replied to written questions submitted by Reuters. “The sourcing decisions made on the 787 are a natural evolution of the work done at Boeing Commercial over the years,” the company said. “We’ve said in the past that for the most part, we are satisfied with the general direction. However, there are a few things we would change, and you’ve seen us make changes on the 787 over the years.” HARD WORK AND HEARTBREAK Back in Seattle, workers take little comfort in the words of their leader McNerney, the onetime head of GE Aircraft Engines. McNerney came to Boeing in 2005 after a tenure as CEO at 3M Co, a conglomerate that produces tens of thousands of diverse products like Scotch tape, medical masks and optical film used to brighten flat screen TVs and computers. A group of Boeing employees, mostly stewards in the International Association of Machinists (IAM) union, sat down with Reuters in December to describe their own experiences on BCA projects, including the 787. Daniel Swank, 47, an aircraft maintenance technician on the 787 program, who had previously worked on the 777, said “I can say it’s night and day as far as processes and flow.” Swank and his colleagues refer to pre-Dreamliner Boeing as “legacy.” In those days, he had easier access to the program engineers who worked in the same building and could quickly address problems as they arose. “They started vendoring out years ago, but pretty much legacy is different from 787, because on 787 everything has been vendored out,” Swank said. He recalled a time on the 787 program when he ran out of a particular washer to fit with a screw on the plane. He said he had to fill out paper work to order a single washer and waited one day to receive it from the outside supplier. “That shows you how ridiculous it’s gotten,” he said. “Everyone knows that vendoring has killed this program. You have contractor agreements that have slowed the whole process down.” That assessment is shared by Jason Redrup, 48, who has been with Boeing for 15 years and currently works for the IAM. Prior to that post, he was a structures mechanic on the 767 where he put the airplane body sections together. He said Boeing’s plan to fly the Dreamliner parts to Seattle for easy assembly has not worked out. “On the 87, the idea was Boeing was not going to own any of that. That all this stuff was going to come in kits — all the parts, all the fasteners, everything you needed to do this one particular job,” Redrup said. “It’s a very elaborate supply chain, so even their suppliers don’t necessarily control where parts are being made,” he said. “So it’s a very complicated web of work now that’s not so easy to fix when there’s a problem.” Then there is Clark Fromong, 49, who has been at Boeing for 23 years. He makes duct work and tubing. His parents worked at Boeing as do both of his brothers. He said outsourcing since the 1997 merger — and especially since the Dreamliner — has made life at Boeing and in the Puget Sound region stressful and gloomy. Workers who earned a living in plane-making now must look elsewhere and often leave the state. “We keep offloading our work overseas, and it’s cutting our work in half,” Fromong said. “So we all think our jobs are going away. The attitude is everyone is always nervous. Always on needles. Stressed out.” Aircraft workers near Seattle suffered another blow in 2009 when, after a long battle to keep 787 assembly in Everett, Boeing selected South Carolina as the site of its second 787 final assembly plant. The company aims to ramp up 787 production to 10 planes per month in 2013. The plant in South Carolina is expected to create thousands of new jobs in that state and is likely to be less disruptive to Boeing than its Everett counterpart, where four major IAM strikes in the last two decades have cost Boeing about 200 days in lost production. The machinists in South Carolina, a right-to-work state, voted against IAM representation. Tom Wroblewski, district president of the IAM unit representing Boeing workers in the Puget Sound region, said downsizing and outsourcing have taken a toll on IAM membership, which is down to about 25,000 today from 42,000 in 1990. He illustrates his point with a graphic depicting work performed by IAM members on six models of Boeing commercial planes. Parts of the plane that are made by IAM workers are colored red. The graphic for the single-aisle 737 is mostly red, compared with the 787, which features only a little red, mainly on the vertical fin. IAM members and local government leaders mounted a campaign before work began on the 787 to entice Boeing to make the plane in Washington. The union was later surprised to find out how little work the locals would actually get. “No sooner did the helium go out of the winning balloons than we find out that their commitment was to assembling the airplane and that was it,” he said. But three years of delays speaks for itself, he said. The vast global partnership was meant to share risk and cut costs. The opposite is happening, he said. “I’m done saying ‘I told you so’ on the 87,” Wroblewski said. “When they announced they were going global, we told them at that point: ‘You go global, you put all of your eggs in the suppliers out there. You’re going to lose control of your airplane. And when you lose control of your airplane, there’s nothing you can do. So what’s happened? They’ve lost control of it.” WHAT WENT RIGHT One key Boeing supplier and a long-time partner to the company, U.S.-based aircraft components supplier Rockwell Collins, disagrees with the negative assessments by labor leaders. “There’s obviously a lot that gets press these days,” said Jeffrey Standerski, vice president and general manager of Rockwell Collins’ air transport systems. “But I’ll tell you what: It’s really phenomenal when you think about the success that the Boeing systems are having in the flight test program.” Rockwell Collins makes cockpit electronics for the Dreamliner. The company has a contract with Boeing valued at $3.5 billion over the life of the Dreamliner program. Standerski describes a cohesive design and manufacturing process that involves constant communication between Boeing, Rockwell Collins, Honeywell International, GE and Hamilton Sundstrand, who also work on airplane systems. He said Boeing contacted suppliers in the earliest stages of the 787 program and set up identical labs for engineers at the various companies. “Things have gotten more obviously complex on airplanes because of the increased functionality that is on airplanes,” Standerski said. Integrated architecture eventually will become the norm in plane-making, Standerski said, noting comparable construction practices on the Airbus A350. “It’s going to continue to force companies to innovate,” he said. “It’s going to continue to force companies to make the investments in research and development to make sure that we’re working on the technology for those next-generation airplanes.” HOW WILL THIS PLANE BE JUDGED? By now, Boeing has about 850 orders for the Dreamliner on its books from airlines and aircraft leasing companies all over the world. It’s a record number of orders for a plane still in development. Aviation experts remain thrilled by the plane’s reported fuel-efficiency as well the promise of a smooth, quiet, comfortable ride for passengers. Their delight was on full display in July when hordes of plane spotters gathered on the perimeter of the Farnborough Airshow in England to watch the Dreamliner land after its first overseas flight. Aviation buffs inside and outside of Boeing frequently call the 787 a “game-changer.” “It’s still a plane with a very broad and eager market,” said Teal Group’s Aboulafia. “It’s going to take them a long time to make money with this. But eventually — assuming it works out — they’re going to sell thousands.” Meanwhile, the more than 50 customers for the plane have mostly withheld public criticism of Boeing, despite the havoc that delivery delays play with their long-term fleet planning. Analysts believe Boeing has probably already paid out hundreds of millions of dollars in penalty payments for late delivery. Boeing has not said what it has spent on the Dreamliner program so far. But experts believe the plane is at least several billion dollars over budget. In the end, the Dreamliner will be judged on its safety, reliability and ability to deliver on its many promises, said Ray Goforth, executive director of the SPEEA union in Seattle. “The real test on the 787 is going to come in its first year in service,” he said. The reliability rate of the Dreamliner will have to be near 100 percent to appease cost-conscious airlines that cannot afford to have a plane frequently out of service for repairs. “If it turns out that this thing is a dog because more and more of these problems are still cropping up, you are going to have to fix them quick and keep that level of confidence in the plane, or those orders will just evaporate,” Goforth said. At the same time, the Dreamliner and Boeing will also be judged on their impact on U.S. labor and American engineering. The Dreamliner will be delivered sooner or later. And someday the same planes now parked in Everett may be the first of thousands of 787s to take their place in the skies among other Boeing icons like the jumbo 747 and the shorter-range workhorse 737. But Boeing employees in the Puget Sound region are increasingly bitter about a corporate culture they say erodes the skills of American workers and makes their company less attractive to young people entering the job market. They hope Boeing leaders will soon see things their way. Judging by its statements — including the emailed comments to Reuters — the company and its critics may not be so far apart on the issue of outsourcing. “We made too many changes at the same time — new technology, new design tools and a change in the supply chain — and thus outran our ability to manage it effectively for a period of time,” the company said. “In short, we have learned, and we are applying our learning.” (Reporting by Kyle Peterson and Tim Hepher; Editing by Jim Impoco and Claudia Parsons) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Break Out the Shovels: Major Ramp-Up In Apartment Development Expected in 2011

January 19, 2011

Emboldened by favorable demographic trends, improving supply/demand metrics and lower construction costs, apartment developers are eager to start replenishing their development pipelines. The 22,536 units forecast by CoStar to be added to the nation’s apartment supply in 2011 is expected to spike up to 94,588 units in 2012 and just over 109,000 units in 2013 — increases of 320% and 384%, respectively — over the current year. By 2015, CoStar…

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Arthur Rosenfeld: Working Around Life’s Obstacles

January 16, 2011

Walks like a duck and talks like a duck, it has to be a duck, right? In a word, no. At least not in the case of Russell Bishop’s new offering Workarounds That Work — How to Conquer Anything that Stands in Your Way at Work . The title, subtitle and cover art all suggest yet one more addition to the huge library of business success books, yet there is a wonderful surprise lurking beneath the surface here. Bishop has a long and impressive track record solving problems and bringing people together as a corporate consultant for major corporations. In that role he has developed something of the voice of the elder statesman, not necessarily a member of the wink-and-nod crowd, but certainly a certain savvy and perhaps even gravitas. He’s a straight shooter and his chapter heads, ( It All Starts With You, Getting the Right Things Done, Misaligned Leadership and Unclear Direction, Death by Decision: Stop Deciding and Start Choosing, When the Best and Brightest Are Wrong , just to name a few) ring simple and true. Indeed, every one of the book’s 238 pages delivers something that smells like nuts and works like bolts — useful observations, information and techniques that help the reader look at the same old thing in a fresh and different way. Most of it isn’t startlingly new, but all of it is couched in a fashion that makes it feel like it is, and stimulates a different approach. That’s something, because unless we’re Einstein or Homer, it has all been said before. How many times, for example, have we read ways to stop procrastinating and just get down to work? How many times have we heard not to blame others for our own laziness and shortcomings? Plenty, and Bishop doesn’t go there. Instead, for example, he likens work to exercise. It’s there and you can duck and dance all you want, but it still has to get done. In the chapter titled The Email Avalanche he adds to the run of solid advice by giving the desk jockey’s nemesis a clever once-over. “Always change the ‘subject’ line to reflect what you’re doing,” he writes. “Use the Cc line for people who need to know about the action but do not have to take action themselves.” Ever thought of it quite that way? Hmm. In addition to tried-and-true recommendations for handling clutter, Bishop actually discusses screen dimensions in this chapter, reminding you that there may be important messages waiting below the line of your browser window. Nuts-and-bolts indeed. Admittedly, some of Bishop’s observations are standard corporate fare, as in the obvious concept (in the chapter Are You a Corporate Firefighter? ) that while it’s wonderful to be the hero, the need for repeated dramatic rescues reveals some fundamental mismanagement. On the other hand, there are some real gems. The chapter on making decisions, for instance, advances the innovative notion that we should substitute choosing for deciding. The word “decide”, Bishop says, suffers from the suffix “ide”, which is often associated with killing, as in fratricide, homicide, etc. Deciding, he writes, is a process of limitation, while choosing can be a creative, a positive and proactive process. In another particularly memorable passage, the author reminisces about the way spelling tests were graded when he was a child. -7, for example, or -4. Instead, he suggests, why not focus on how many answers we get right? This deceptively simple idea echoes one of the books recurring themes, which has to do with choosing positive options over negative ones. Many books in this category work their magic from the outside in. That is to say they examine the circumstances, obstacles and issues and propose external solutions. Other books in the genre turn this around and go from the inside out, looking at the prejudices, presuppositions, habits and addictions we harbor on the inside, and how they manifest in our external life. Workarounds That Work is a rare find in that it examines its topic from both directions. Thus, in addition to advice on how to organize your in boxes, we see lines like “What could you do that would make a difference in your job that requires no one’s approval, cooperation, support, or agreement other than your own?”, concepts like “time management problems are really self management problems”, and chapter heads like Multitasking Our Way to Oblivion , wherein Bishop cleverly proposes substituting the setting of multiple goals to the juggling of multiple tasks. The more you read, the more you realize that Workarounds That Work is a personal development guide hidden as a business handbook. Spirituality circulates through the book’s business meat and management gristle like blood through bone. It’s a treat of a read for a much wider swath of readers than its category feel would suggest. Here’s hoping that in his next book, this practical sage will be brave enough to cross the line he only touches with his toe in this one and give us his thoughts on the repurposing of business so that profits are not the Holy Grail, but rather merely a tool for the development of employees and community.

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